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May 23
taking top ups on loans

Taking Top Ups on Loans

Consider this situation. You have availed a home loan of 40 lakhs, five years back. You have paid off 10 lakhs. Now, you find that certain rooms in your house are due for a major renovation. You have decided to apply for a personal loan and approach your bank.

Scenario 1: The bank officer accepts your request for a personal loan, and it gets sanctioned. Now, you have to pay two EMIs every month: one for your home loan, the other for your latest personal loan. Also, the interest of the personal loan is much higher when compared to your home loan. Your finances become strained, till the day you pay back both the loans.

Scenario 2: You approach the bank with the intention of applying for a personal loan. A friendly bank officer analyses your situation and guides you to take a top up on your existing home loan. With this option, you just have to pay a single EMI, and you can avail the amount required for your home renovation at a lowered rate of interest when compared to prevailing rates for personal loans.

Obviously, the smart decision here is to choose scenario 2.

Yes, top up loans are a preferable alternative to availing personal loan online at exorbitant rates. Here’s all that you need to know about these loans.

What is a Top-up Loan?

A top-up is basically an additional amount of money given on an existing home loan or a car loan. You can avail it at the bank where you have already taken the first loan. It’s similar to a personal loan but is available at a lower rate of interest. It can be used for any reason like medical emergencies, funding your child’s education, a wedding or even for starting your own business.

Top-up Loan Features

  • Faster approval and simplified documentation
  • Lower rate of interest
  • Lower EMIs
  • Available for longer tenures when compared to personal loans
  • Easy repayment facility

Documents required for availing a top-up on your existing loan

The list of papers required varies from one bank to another. The standard list of required documentation is an ID card, proof of residence, existing loan documents, proof of your income like salary slips, bank passbook if you’re a salaried professional or profit/loss statements of your business along with your application form.

Some banks do not ask for a copy of the KYC documents since you had already submitted them when you applied for the previous loan.

Tenure of Top-up Loans

It’s generally, up to 10 to 15 years. However, it varies from bank to bank.

Charges for Top-up Loans

Just like all other loans, you have to pay processing, transaction fees, and other penalties.

Factors to consider when applying for Top-up Loans

  • Check for the processing fees and other charges, before you shift your existing loan from one bank to another bank.
  • Banks grant you a top-up loan, only after evaluating the value of the property. However, remember that the bank may not always give sanction for the entire amount you seek.
  • Not all banks grant top-up loans. Make sure to check with your bank if they offer this facility.

So, if you’re in need of cash, act smart and avail a top-up on your existing home loan or car loan.

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