benefits of a top up home loan

According to a report, housing loans grew 9.9% in the period between April 2019 and November 2019. Furthermore, as of December 2019,the total outstanding balance in the housing loan sector stood at Rs.19,073 billion.

  • In January 2020, the housing credit segment grew at a rate of 17.5%.
  • As per estimations, CAGR in the housing finance sector is expected to be within the range of 9% and 12% for the Financial Year 2021.

Several financial experts consider a home loan to be a positive liability as the credit facility allows individuals to enhance their equity significantly. Despite that, a home loan is still a big-ticket and long-term expense that might lead borrowers to stretch their finances to the extremes. In that case, addressing any other hefty financial obligation might be a challenging prospect.

Ergo, to facilitate an additional funding buffer, financial institutions offer top-up loans to home loan borrowers. One of the most critical benefits of a top up home loan is that it is quick and straightforward to avail. So, you can attend to any financial obligations promptly with it conveniently.

What is a top-up loan?

A top up loan is a credit facility via which you can avail an additional amount over and above your existing home loan.

The eligibility criteria for a top-up loan are –

  • Robust home loan repayment history.
  • Home loan balance transfer.

In other words, financial institutions extend the benefits of a top up home loan when a borrower possesses a history of timely repayment of their existing housing credit and when they opt for a home loan balance transfer.

  • Number of home loan accounts stood at 14.2 million as of December 2019.

Since a lender already assesses and vets all significant criteria when you avail a home loan, further provisos for eligibility are not deemed necessary. Therefore, you can use a top-up loan to mitigate your urgent financial requirements.

What are the features and benefits of a top-up loan?

A top-up loan is one of the most convenient financial devices to address monetary objectives when your finances are pre-occupied by existing obligations like home loan repayment.

Here’s all you need to know about top-up loans on home loans –

  1. Extensive loan quantum

One of the primary benefits of a top-up home loan is that it comes with a high-value quantum. This top-up amount depends on the property’s value, and therefore, you might be eligible for a quantum higher than the home loan amount itself.

  1. Void of end-use restriction

Another critical advantage of a top-up loan is that it does not come with any end-use restriction, unlike a home loan. Therefore, you can utilise the substantial loan amount to fulfil an array of financial obligations like home renovation costs, medical emergencies, child’s education, inter alia. Furthermore, in case you are piled with multiple debts, you can also choose to consolidate those liabilities into one and reduce your interest outgo significantly using a top-up loan.

  1. Affordable

You can avail a top-up loan at an affordable rate of interest in comparison to other unsecured credit facilities. Therefore, alongside securing a lower interest rate when you opt for a balance transfer for your home loan, you can also enjoy an affordable top-up amount on and above that amount to meet ancillary financial obligations.

  1. Minimal documentation

One of the reasons why a top-up loan is an ideal monetary device to address exigencies like a medical emergency is that it requires minimal to no documentation to avail the credit facility. It is because only existing home loan borrowers and individuals who refinance their existing housing loan with another lender are eligible to avail a top-up advance.

Thence, the concerned lender already possesses all relevant documents of such borrower in their repository. They thus typically do not require the individual in question to furnish any additional papers to avail a home loan.

  1. Tax benefits

One of the most profitable benefits of a top-up home loan is that you can avail tax benefits on the interest outgo on account of such credit. Alongside tax exemption of up to Rs.1.5 lakh under Section 80C of the Income Tax Act on the principal amount of a home loan, a borrower is also eligible to avail Rs.2 lakh as an exemption on the annual interest outgo of such home loan under Section 24.

Furthermore, a borrower can also avail an additional tax exemption of up to Rs.50,000 annually on the yearly top-up loan interest expense if the loan is used for home renovation, acquisition, construction, etc.

These are only a few ways how you can benefit from a top-up loan. Other features of this credit facility include an extended repayment tenor of up to 20 years as well as prepayment and foreclosure facilities among others. Nevertheless, before availing a top-up loan ensure to vet all its aspects and its bearing on your financial standing for sound pecuniary management.


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