Sometimes, you face several financial challenges that are difficult to cope with. You may need funds to meet certain expenses, such as a medical emergency, a child’s tuition fees, wedding costs, home renovation, and so on. How do you take care of these and many other expenses with lean savings?
For existing borrowers, it’s not often easy to repay the equated monthly instalments (EMIs) attached to a loan, as it’s usually a great expense that drains nearly all their funds. You can consider taking a top-up loan to conveniently pay for unexpected financial obligations.
The good thing about top up loan is that they come with low-interest rates, long repayment tenors, and other benefits. Read on to learn more about this great financial solution.
What is a Top-Up Loan?
A top-up loan is a kind of loan that you take in addition to an existing loan. To qualify for a top-up loan, you must have serviced your existing loan to a certain extent.
Lenders determine the top-up loan amount that you can avail yourself of but the top-up loan and remaining home loan amounts should not exceed 70-80% of the property’s value.
Who Can Apply for a Top-up Loan?
While this seems to be an excellent way to meet urgent needs, lenders have a set of requirements guiding the application process. To qualify for a top-up loan, you must.
Be an Existing Borrower
Remember that a top-up loan is an add-on to an active loan, hence before a lender approves your application, you must have taken a loan from them already.
Possess a Clean Repayment Record
To ensure that they only approve the applications of low-risk borrowers, lenders require that you possess a clean credit record. Not having one reduces the chances of getting approved with a decent interest rate.
Features of a Top-Up Loan
Are you curious about the features of a top-up loan? Below are some features of a top-up loan that you should know.
Sizable Loan Amount
You can avail yourself of a large top-up loan amount from your preferred lender. This is usually 70-80% of the property’s market value.
Long Repayment Tenor
Lenders allow you to repay the top-up loan amount over a long period. The longest tenor you can get for a top-up loan is 20 years.
Reduced Interest Rate
Before applying for any kind of loan, you should consider the interest rates being offered. Top-up loans often come with low-interest rates and this makes repayment easier for you.
What are the Benefits of a Top-Up Loan?
Below are the amazing benefits that a top-up loan assures you of
Zero End-Use Restrictions
When you opt for a top-up loan, lenders do not bar you from using the availed amount to finance a certain need. You can use the money to pay for anything you wish.
Income Tax Benefits
Section 24 of the Income Tax Act allows you to claim income tax deductions of up to Rs.2,000,000 on a top-up loan’s interest component.
Foreclosure and Part-prepayment
You can decide to close your top-up loan before the tenor ends through the foreclosure or part-prepayment options.
Eligibility Criteria for a Top-Up Loan
To qualify for a top-up loan, you must meet the following eligibility criteria:
- You must not have missed more than one EMI payment on your existing loan.
- Although your lender has your documents due to the loan you previously took, you will have to provide some Know Your Customer (KYC) papers.
- If you are opting for a home loan balance transfer plus a top-up loan, you must have a healthy loan repayment record of up to a year.
- You must be aged between 21 and 65 years.
- Salary earners, self-employed individuals, and professionals are eligible to apply.
Must Read: TIPS & TRICKS TO REPAY YOUR HOME LOAN FASTER
How to Apply for a Top-Up Loan
If you have decided to take a top-up loan, here is a detailed guide on how to proceed:
- Log on to the lender’s website to access the application form.
- Input personal details like your name, mobile number, residential address, and Personal Identity Number (PIN).
- State your occupation, whether you’re a salary earner, professional or self-employed individual.
- Agree to the terms and conditions that include the consent to receive calls or text messages from the lender’s representatives.
- Generate a One Time Password (OTP) and input it when received.
- Await contact from the lender’s representatives to move forward with your application.