Top-Up Loan, as the name suggests, is a loan given on top of another loan Home Loan. That is why it is also known as a Top Up Home Loan. Top-Up Home loan is offered to existing home loan customers. Almost all banks including Non-Banking Finance companies (NFBCs) offers Top up Loan. Terms condition, interest rate and tenure of this loan differ from bank to bank.
You need to have a very good credit history in order to take this loan. There is a common misconception that Top up Home loan is given only for house renovation or for additional construction. However, it is not true.
No Additional Collateral
Top Up home loans does not require any type of additional collateral. You need not provide any documents/evidence of holding an additional asset for availing this loan. Your home loan agreement/paper will act as a collateral.
The interest rates charged on Top-Up Home Loans are 1% 3% higher than a home loan interest rate. This means you will get Top Up home loan at the interest rate of 11% -14%. At the first glance this cost seems to be high but if we compare it with a personal loan it is low.
Loan amount in the case of a top-up home loan will be limited to your sanction home loan amount/outstanding balance. In some cases, a bank may give additional loan amount sanction, it all depends upon your credit history and property rates where you have purchased a property.
If you have an existing home loan with a lender and a choice is given to you between a personal loan and top up loan you must select top-up loan as it offers benefits like lower interest rate, higher tenure, lower EMI and minimum documentation.
- You should be existing home loan customer of the bank or NFBC.
- You should be holding very good repayment record for few years.
- You should not have exhausted your home loan limit.
- Your credit score should be good.