Top-Up Loans: All You Need to Know

Here is a scenario- you get a home loan worth Rs. 50 lakhs from a bank to buy your dream house for a term of 20 years. Five years later, you realize you have to carry some major renovations in your house and need another 5 lakhs for the same. What do you do? Well, a personal loan would be the usual choice. However, what if you had a better option? That’s what a top-up loan is.

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What are top-up loans?

Top-up loans, as the name suggests, are loans given on top of an existing home loan. These loans usually have a much smaller interest rate than a personal loan.

How does a top-up loan work?

If you are still repaying a home-loan and need more money, then you can get a top-up loan from your bank on the basis of that loan.

The following are some of the common conditions to qualify for a top-up loan:

• You must have a home loan with your bank that’s not repaid yet.
• You must have passed the waiting period as set by your bank. Usually, banks have you enter 6 months to 1 year into the loan repayment before you become eligible for a top-up loan.
• Your repayment history should be clean, i.e. sans late payments.
• The loan amount should not exceed 70% to 80% of the property value.
• The top-up loan should not have a term longer than the time remaining for the completion your home loan term. So, if your home loan has a term of 15 years and you are into the 5th year, then your top-up loan term should not exceed 10 years.

Top-loans are a much better option than getting a new personal loan because not only you can get a better interest rate and favorable terms, the paperwork is also minimum because you already have a home loan that takes car