Top up loan is a facility offered by financial institutions that allow the home loan borrowers to borrower an additional amount over and above their existing loan. Read on to know more about it and its benefits.
If you have availed a home loan, it is obvious that a large portion of your income goes towards repaying the EMIs (Equated Monthly Instalments), right? And, in such a situation if any emergency occurs, and you need a significant sum, it can be challenging to arrange the funds to meet the immediate expenses. The emergency could be anything, someone in the family may need medical attention or you may need quick funds for your business, etc.
How will you get funds? You can either break into your savings or use the next best alternative, i.e., apply for a top-up loan.
What is a top-up loan?
A top up loan is a funding facility that you can obtain from a lender where you have an ongoing home loan. It allows you to seek additional funds over and above your home loan. It is a universal loan, and anyone can avail this facility to meet their personal or professional financial requirement, except for speculative purposes like investing in shares, gambling, etc.
You can avail a top-up loan for following emergency purposes:
- Medical expenses
- Buying business equipment
- Marriage expenditure
- Paying higher education fees of your child
- Down payment for a big-ticket purchase
- Home renovation or home extension
Benefits of availing top up loan
One of the primary reasons why many people prefer applying for a top up loan instead of a personal loan during an emergency is that the interest rate for these loans are much lower as compared to other unsecured loan options.
Getting an additional loan while you are repaying your housing loan can further burden your finances and you may want a longer repayment period to afford the EMI, right? This is precisely what you get with a top-up loan. These loans have a longer repayment tenure as compared to a personal loan or gold loan. Thus, it makes repayment manageable.
Since you have an existing relationship with the lender, you can easily get your top up loan approved and disbursed. You need not have to go through paper works again, as the lender will already have your details. However, the key to getting a top up loan sanctioned without any hassles is to have a commendable repayment history without no default for at least six months.
Today, as most of the financial institutions offer online services, you can apply for a top up loan online and get the approval almost immediately.
A top up loan is an excellent way to get access to a large sum as some of the lenders offer top up loans of up to 50 Lakhs. Also, if you have maintained a good relationship with the lender and have a good credit record, you can negotiate with the lender and enhance your loan eligibility.
If you have availed balance transfer of home loan, you can apply for a top up loan with the new lender provided you meet their specific requirement and comply with relevant charges.
Thus, a top up loan has several benefits, but make sure that you do your due diligence before applying for an additional loan and plan your finances well beforehand so that you can repay the amount without any hassles.