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- Home Loan Guide
Life is uncertain, and the events that you face are often unforeseen. If there comes a situation in which you need more money, what will you do? You may already be having a home loan, and you may consider taking another loan for your unexpected expenses. Well, you don't need to take another loan! You can now top up the existing home loan as it is more convenient than getting a new loan. Here is all you need to know about topping up your existing home loan.
When you take a home loan for the first time, there will be a certain eligibility limit for the amount offered. If you have already reached the full limit, there is no scope for you to take another loan immediately. But over a period of time, your income may have increased, and you would've paid back some amount of your loan. So your loan eligibility would have gone up owing to such positive factors. Under these circumstances, you will be eligible to top up your existing home loan.
As per most of the home loan policies, a top-up option on a home loan will be given only after 6-12 months of paying the earlier loan. But if you have a good repayment track record, you can avail a top-up on your existing home loan. The loan provider will further investigate the need for a top-up and the final decision of approving the same lies in their hands.
Here are some of the reasons for which you can opt for a top of the existing home loan.
It can be used as a personal loan
To purchase another property
To purchase another plot of land
To renovate your home
To purchase consumer products
For your ward's education/ marriage
For business needs
To bear medical expenses
When you choose to top up your existing loan, you need not keep any of your assets as collateral. However, one must remember that in order to get the papers back in your hand, you need to pay off both the original loan and the top-up loan.
You can enjoy certain tax benefits on the top-up loan if the top-up loan amount is utilized to buy a house or if you are using it for the renovation of your home. Apart from this, using the top-up for any other purpose will not give you any tax benefits.
Based on your original loan amount and your eligibility, you can take a top-up loan till you reach the upper limit as set by the bank. It can range between 15-40 lakhs. For instance, if you have taken a loan of Rs. 30 lakh, and your upper limit is Rs. 60 lakh, you will be eligible to top it up and take another 30 lakh loan on the same asset.
Most banks charge a certain processing fee for approving a top-up loan. These charges are often the same as the home loan processing fees. For instance, a bank may charge 0.75% of the amount or Rs.2000 whichever is maximum as the processing fee for the top-up loan.
The rate of interest for the top-up loan is only 1.5% to 2% higher than the home loan interest rate. This might add up to 11.5% to 14%, which is still less compared to a personal loan.
A top-up loan is undoubtedly a better alternative as compared to a personal loan. Often, personal loans come at a rate of interest of about 18-24%. By comparing the features listed above with a personal loan, you will be able to understand that it is much simpler and much more beneficial for you to top up your existing loan than taking a personal loan. By maintaining a good loan repayment track record in a stipulated time period, you can avail the eligibility to top-up your existing home loan.
Availing a top-up loan is becoming more and more popular in today's time. The many advantages that it comes with, and the ease of procuring it make it a preferred option as compared to other types of loans. Understanding the different home loan policies and finer details is important to make the most of any loan that you take. Make sure that you maintain a good track record, and you can be at ease knowing that if the need arises, you can always rely on getting a top-up on your existing loan.
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