What is a Top-Up Loan?
Top-up is a provision that helps you adding a certain amount or topping up some amount in your existing home loan amount.
Features of the Top-Up Loans
- You can obtain or apply for a top-up loan for different purposes. This loan can be treated as a personal loan and further used for home renovation, furnishing, home decor and other emergency fund requirement.
- The top-up loan is available for a time period of up to 20 years or until the balance tenure of the original home loan. Applicant’s profile, income, age, and value of the property are considered in this case. Also, the tenure varies from bank to bank.
- The amount to be granted as top-up home loan differs from bank to bank. Moreover, the actual home loan amount and the new top-up loan amount should not be more than 70% – 80% of the value of the property.
- The interest rates of the top-up loans are available at the same rates as home loan rates. Some banks keep the top-up loan rates a few points higher as compared to the original home loan rate.
Top-up Loan Eligibility Criteria
The following eligibility criteria must be taken into consideration when applying for a top-up personal loan:
- You can avail a top-up personal loan only if you have an outstanding personal loan (existing relationship) with the lender
- A top-up loan can be availed only after a certain stipulated time has passed- after you have repaid a certain portion of your loan
- You must have a clean repayment track record and there should be no overdue EMIs/ missed EMI payments
- You should also have adequate loan repayment capacity
- You should have a good CIBIL/credit score, as it points towards higher creditworthiness and a lower repayment burden
Document Required for Top up Loan
Since you are an existing customer, obtaining a top-up loan may require you to submit no new documents, since your lender already possesses documents such as:
- KYC
- Address proof
- Income proof
- Property papers
- Business proof
- Bank statements
Interest Rates for Personal Loan Top-Up
Top-up loan interest rates can vary widely across lenders. They would also vary depending on the various aspects of applicant’s credit profile such as his/her credit score, the quantum of loan sanctioned, loan tenure, nature of employment, etc. Usually, the top-up personal loan interest rate is the same as your existing/outstanding personal loan interest rate.
Do I get Tax Benefits on a Top-Up Loan?
A home loan normally provides tax benefits like deduction of up to Rs. 1.5 lakh on principal amount repayment as per section 80C of the Income Tax Act. Borrowers can also get up to Rs. 2 lakhs of deduction towards interest payment in a financial year under section 24. For a top-up on a home loan, borrowers can also claim tax benefit.
Benefits of Top-Up Loan
1. Reduce the Burden of Loan
One of the main reasons why many people in India opt for top up loans is that it allows you to consolidate all your existing loans and thus help you minimise the overall interest rate on loan. You can avail a top-up loan on your personal or home loan and pay off other debts, which in turn can reduce the burden of paying multiple loans at the same time.
2. Minimal Documents Required
Most banks in India have simple and minimal documentation for top-up loans. This is because the customers usually have an existing relationship with the bank and the banks are also aware of their credit history. If you are unsure how much top-up loan you can apply, you can use the top up loan calculator to know exactly the amount you need and how much would be the EMI amount.
3. Quick Approval
Since the banks have a relationship with the top-up loan applicants, the process of approval is quicker than a personal loan or a home loan. Also, the disbursement of the amount is faster as the bank is aware of the credentials of the applicant. Thus, a top-up loan is a great way to get access to funds immediately and meet emergency needs.
4. Interest Rate
One of the most important things people look for while applying for any type of loan is the interest rate. Most lenders in India offer attractive top up loan interest rate as compared to other unsecured loan. This is also one of the major reasons why several people opt for a top-up loan as it helps them manage their repayment easily. Some lenders in India allow the top-up loan applicants to choose between a floating or fixed interest rate.
5. No Collateral or Security Needed
Most lenders do not require the top-up loan applicants to provide any security or a collateral against the amount they borrow. Neither do they require any guarantor. This not only makes it easy to avail the loan, but also considerably reduces the time taken to process the application and disburse the funds. Thus, you don’t have to worry about losing any asset while applying for a loan.
6. Longer Repayment Duration
The banks usually decide the repayment duration for the top-up loan based on the outstanding balance and the loan amount you apply for. Usually, the duration is much longer than the personal loan, which is why people opt for this loan. However, you must know that the tenure of the top-up loan cannot be more than the tenure of your original loan. You can use the top up loan EMI calculator to know exactly the amount you must repay every month till the end of the loan term.
7. Balance Transfer Facility
If you have availed a home loan or a personal loan from a certain lender and if that lender does not offer you a top-up loan, you can transfer the loan to another lender. This will not only help to get the additional loan, but also help you meet the financial requirement.
Disadvantage of Top Up Loan
However, if the top-up loan is on an existing secured loan like an auto or home then it increases principal owed and thereby reduces the equity. This would also mean if one is trying to sell a vehicle, purchased by taking auto loan, the borrower would have to first clear the top-up loan as well, which would not be the case if the customer had accessed a new personal loan.
Critically analysing the two types of loan options, he suggests, so the answer to this question depends on what the need of the consumer is, if the need is short-term or long-term and also depends on how quickly they need their funds. However, in all cases I would advise any potential borrower to always shop and get quotes from various lenders and make an informed decision if a personal loan from a new lender is better or a top-up loan from an existing lender.
Where to get Top-Up Loans ?
Omozing helps make Smart Money Moves for a Lifetime. They strive to get lowest interest rates and best terms for your Online Applications at www.Omozing.com . We’ve made business lending smarter, faster and easier by transforming the approval process from stumbling blocks to stepping-stones. This enables borrowers to not just get access to capital, but also understand what areas they need to work on in order to enhance their credit profile. Omozing ensures that Borrowers get a secure, safe and reliable application process that be tracked online.
5 Reasons to choose Omozing
1. Loans from INR 10k to INR 10 lakhs
Personal Loan Interest Rates starting from 0.8% p.m, and Loan amount ranging from INR 10,000 to INR 10,00,000. The Minimum and maximum repayment period ranges from 1 month to 48 months. CIBIL 600+ all company categories (including LLP, Self Employed, Proprietorship)
2. Cutomised Tailor Options
- Depending on your demands, we may provide quick financing of varying quantities at affordable interest rates.
- You have the freedom to utilise your loan anyway you want, whether for business or for immediate personal needs.
- Flexible repayment options depending on your specific cash flow and budget, as well as conditions that is beneficial to your position.
3. Lower CIBIL
While most lenders require borrowers to have a CIBIL score of over 750, at Omozing.com provide loans even with 600. Besides the CIBIL score, we also considers your age, employment status, and net monthly income.
4. Ways to apply
You can apply for a personal loan through us by 2 ways:
1. You can download our Mobile Application from Google app store.
2. Apply on portal using out Personal Loan link
5. Prompt Loan Disbursal
An easy online application process facilitates speedy verification and disbursal of loan. Get KYC verified from the comfort of your home and have our loan manager take care of an instant transfer of funds to your account.