As in the name above, we can see top-up loans, which means that the bank provides additional amounts to the existing home loan customers. Based on the customers’ personal or professional needs and the credit score, the bank decides the amount.
The financing institutions impose no precondition for the usage of funds, and the mortgage of any property for availing the top-up loan is not required. This amount can be used by customers in any form, as per their requirements.
Ways for availing top-up loans
- For availing of the top-up loan, some parts of instalments of the home loan should be paid by the existing customers.
- The home loan EMIs defaulters are not provided with top-up loans easily; the criteria for the EMIs may vary from bank to bank.
- If any of the customer’s applications gets rejected by the financing institution or the bank, they may consider transferring their existing home loan to some other bank which offers them with a top-up loan also.
What is a Top-Up Loan?
- The idea of Home Loan Top-Up was started for the existing home buyers who are paying hefty instalments of home loans and have also exhausted their savings in the process of buying a house.
- The top-up loan helps and allows these kinds of individuals to avoid taking personal loans for their requirement; therefore, they can apply for the top-up loans in case of any financial emergency such as kids’ education, home interiors, or any other urgent need or requirements.
- The good track of credit repayment records and the customer’s repo with the bank or financing institutions make it easy and hassle-free for them to avail of the top-up loan.
- The top-up loan helps individuals to avoid borrowing from their friends, family, and relatives or high-interest rates financing schemes, which may put more stress and burden on an individual’s shoulder.
- Moreover, the high rate of interest of the personal loan can affect one’s monthly budget and expenses, as it is very difficult to pay instalments of two loans at the same time.
Eligibility for Top-Up Home Loan
- The existing customers’ past repayment records will be evaluated by the bank or the lending institution for their security purposes.
- As soon as the evaluation procedure is completed, the bank or the lending institution will further accept the top-up request by the customer and ask the customer to complete the documentation to sanction the additional amount.
- The KYC formalities will be conducted again if the customer wants to transfer their home loan to some other bank.
- The amount sanctioned under the top-up scheme will depend upon the banks’ terms of disbursing; it varies from bank to bank.
- By keeping in view customers’ income and margin constraints, few banks considered that the existing home loan dues and requested top-up amount should be in line with the total home loan approved initially.
- Based on the existing value of the purchased property through the home loan, some banks consider that the applicants’ overall loan eligibility should be based on the current income with a margin nearly of 25%.
Important Points to Know about top-up loan
The process of the top-up loan is faster than the other loans as the bank already has all the required details with them, so they process it without initiating any additional inquiry.
Lower rate of interest
The top-up loan can be availed on a much smaller or a big interest rate compared to the personal loan as the rate of interest of it varies between 11-24%.
With the consistent EMIs and hassle-free availability of funds, the top-up loan also serves as a trusted source of funding in times of financial emergencies.
The facility of top-up loan is only offered to the existing home loan customers who also have maintained a good credit record. This scheme offers a very limited amount to their customers. The top-up loan amount and the subsequent rate of interest incurred on that will also increase over time, and the amount of the monthly instalment for the home buyers will also increase.
In this article, we have discussed all the major factors of top-up loans. The top-up home loan is a very good opportunity for those who want a small amount of financial loan for their urgent requirements as it works best for them.