hh8 Misconceptions About Loan Against Property Everyone Should KnowA Top-up Loan is an additional amount you can borrow above the existing loan from the current lender. Many housing finance companies offer these loans to their active customers to cover unexpected expenses. These are very common among Housing Loan companies, as their customers have long-term loan accounts and build equity while making current EMI payments. A Top-up Loan is extremely useful for existing Home Loan borrowers whenever a financial emergency arises.
Since many individuals need clarification on “what is Top-up Loan”, here’s a complete guide.
What is Top Up Loan?
Top-up Loans are add-on facilities many loan providers offer their existing loan customers. They are mutually beneficial for both parties. The loan provider retains their valued customers and the borrowers get easy and quick access to funding without complex formalities. It makes Top-up Loans impressively convenient and fast funding sources for emergency expenses. Since the loan providers already have the existing borrower’s KYC and details, they only require a brief revised documentation for the top-up approval.
Who is Eligible for a Top-up Loan?
Financial institutions offer Top-up Loans to existing customers who maintain a consistent track record of regular EMI payments. And a history of missing payments can negatively affect an applicant’s loan application. Since a low credit score indicates EMI delays in the past, most lending companies expect a decent credit score before sanctioning a Top-up Loan. They determine a Home Loan interest rate in India based on the repayment history.
Generally, the Loan amount is less than the existing loan. And the borrower can apply for a Loan after paying a specified number of Home Loan EMIs.
Some lending companies roll the Top-up Loans into the current Home Loan, while others list it as a separate loan.
Benefits of Taking a Top-up Loan
Top-up Loans have many advantages. Some of the primary ones are –
- Available at lower costs
- Faster approval
Lending institutions disburse top-ups quickly, as their process is simpler and quicker than new loan applications. Moreover, the documentation procedure is smooth since they only require the revised income documents for evaluation.
Top-up Loans are the best forms of instant finance that benefit those seeking emergency funds.
As your lender already knows your repayment habits, they usually let go the in-person credit checks. This speeds up and simplifies the loan process. Interest rates are similar to or lower than the current Home Loan rates. And zero or fewer processing charges will be attached to a Top-up Loan.
When to Opt for a Top-up Loan?
Loans have no end-use restrictions, allowing borrowers to use the loan for any purpose. You can use this loan for medical emergencies, weddings, education, home renovation, business expansion, and anything else. Let’s look at some common circumstances when a Top-up Loan can be lucrative for a Home Loan borrower:
- When the borrower needs additional funds for home renovation, extension, or upgrade during the Home Loan tenure.
- Top-up Loans come in handy when the borrower needs urgent money to cover the cost of an emergency or last-minute expense.
- Choosing a Top-up Loan is wise when you need easy money without the hassle of applying for a new loan.
While it sounds exciting to get a Top-up Loan on an existing loan without much ado, you should remember it is still a financial obligation and needs regular repayments. Now that you understand “what is Top-up Loan”, borrow easy money for your immediate funding needs. And make on-time payments to build your credit score and improve your relationship with the loan company. The convenience and speed of Top-up Loans are a boon for borrowers seeking an extra funding boost when required.