- Advantages of a home loan top-up over a personal loan.
- Comparison between a personal loan and top-up home loan.
A loan is helpful in times when your important expenses are stuck because of the shortage of money. At this point of time, people generally prefer taking a personal loan. Even though it is the best option for new borrowers but not for a home loan borrower. You might be surprised after reading this but the fact is that a home loan borrower can enjoy many benefits of a top-up loan as compared to a new personal loan.
Here we have given the features of a top-up loan and a personal loan and later given the advantages of going for a home loan top-up.
Features of a Home Loan Top-Up
Read below what are the features of a top-up home loan:
- Available only for an existing home loan borrower.
- Interest rate starting from 7.50% per annum.
- Tenure of the loan can go up to the maximum tenure of your home loan (10-20 years)
- Maximum loan amount depends on the outstanding balance of the existing home loan,
- The loan amount can be used for different purposes such as buying furniture for your home or renovation or any other personal need
- If the money is used for renovation or extension of your home, you can get tax benefit
- The interest rate on a home loan top-up is low
- Loan process is smoother for existing borrowers as well as those transferring their home loan
- There is no mortgage required to submit to the lender for the facility
Features of a Personal Loan
- The interest rate on a personal loan starts from 10.75% per annum
- Maximum tenure you can get is 5 years
- You get the loan for a minimum lock-in period of 1 year
- The maximum loan amount you can get is 40 lakhs
- The loan is approved on the basis of your income and credit history
- Unsecured personal loans can be taken without submitting any asset
- The approval time is generally 3-5 days
Advantages of Home Loan Top-Up
Look at the table below showing the difference between a home loan top-up loan and personal loan. You will be able to understand the advantages you get on the former loan.
|Advantages||Parameters||Home Loan Top-Up||Personal Loan|
|1||Interest Rate||Interest rate on a home loan top-up is much lower than a personal loan. At present, the facility is available at 7.50% per annum onwards||At present, the lowest interest rate available for a personal loan is 10.75% per annum|
|2||Tenure||The maximum tenure can be as high as of the home loan 30 years||The loan can be taken for a maximum tenure of 5 years|
|3||Loan Amount||Depends on the outstanding balance of the existing home loan subject to LTV ratio||You can get up to 40 lakhs loan amount at most of the lenders|
|4||Processing Fee||0.35% to 1% of the loan amount plus GST||The processing fee ranges from 0.99% to 2.50% of the loan amount|
|5||Approval Time||Instant for existing home loan customers||The approval time is generally 3-5 days|
|6||Eligibility Criteria||An existing home loan borrower as well as the one who transfers the loan to another bank.||Both salaried and self-employed can apply for this loan|
|7||Approval Criteria||Keeping into account the repayment history, property value and outstanding loan amount||Based on income, age, credit history and employer category|
|8||Tax Benefit||If you use the money for home renovation or extension, you can get tax exemption||There is no tax benefit on an unsecured personal loan|
Who can apply for a Home Loan Top-Up?
An existing home loan borrower who has continuously paid EMI may apply for a top-up at the present lender. However, even new customers who transfer their home loan to a new lender. So, you can check at your lender if you are eligible for a top-up or you can transfer your loan to another lender to get the benefit.
What is the processing fee on top-up?
A processing fee on a normal home loan is applicable on the top-up as well. So, it will also be variable from one lender to another. The fee generally ranges from 0.35% to 1% of the disbursed loan amount.
How can you apply for home loan top-up?
The process to apply for a home loan top-up is very simple. You can simply request your lender to provide you a certain amount over and above your existing home loan amount. If you have maintained a good repayment track record, you will get the approval for this facility and the disbursal really soon.