Unsure about a Top-up Loan? Here are the Benefits

Home Loans assist you in buying a house, but Top-up Loans take your aspirations a little further by providing you the freedom to turn it into a home of your choice; a home that truly reflects your personality and lifestyle. What’s more? When you desire a vacation to celebrate the achievement of finally having your own place, Top-up Loan has got you covered again. 

Simply explained, a Top-up Loan is given by the lender over and above your Home Loan. You can imagine the case to be somewhat like the Top-up option provided by your mobile service provider when you are running low on balance. A Top-up Loan provides a great alternative for personal loans and credit cards as it comes with lesser rates of interest, longer repayment tenors and higher loan sanction amounts. Even though a Top-up Loan is an extension of a Home Loan, you can use the money for purposes beyond home renovations and repairs. If that is not enough, the government has made it easier on the home buyer by including Top-up Loans under tax benefits. So, if you are still unsure whether you should go for that Top-up to meet your post home-buying expenses, here are the detailed advantages.

You are already eligible - The fact that you have successfully secured a Home Loan is proof that you have passed the eligibility criteria. A Top-up Loan is simply an extension to the Home Loan, hence, the documentation required, if at all, will be the bare minimum. All you need to have then is a good enough record of timely repayments on the Home Loan you already have.

Use the money as you want, no questions asked - Just like you would in a personal loan or a credit card, Top-up Loans are free of end-use restriction. You can use the money for renovation, interior, medical expenses, vacation, celebration, buying a new item, etc. It is always recommended that you utilise the money wisely.

Low interest rates & processing charges - Top-up Loans come with competitive interest rates, almost as good as housing loans, just slightly higher. This saves you a lot of money as compared to other kinds of loans. You can hence comfortably go ahead with the essential expenses such as a car or electronic and electrical appliances. 

You can enjoy substantial Tax benefits - You can enjoy tax benefits on Top-up Loans under sections 80C, 24 and 80EE of the income tax act, provided you have receipts and documents to prove that the Top-up Home Loan taken has been used for acquisition/construction/repair/renovation of a residential property. A maximum deduction of Rs.30,000 on Top-up Loan interest (within the overall deduction of Rs.2 Lakh on the Home Loan interest paid) is permitted on alterations and repairs for self-owned property. No deduction on the principal amount can be claimed. If the funds are used for constructing or purchasing a new property, the principal along with interest will be eligible for deduction subject to the limits provided in section 80C and 24 (b), respectively.

Repay in your own sweet time – Top-up Loan tenors usually go hand-in-hand with the Home Loan tenors. So, you have long enough time to stretch your loan and repay it comfortably. Which other loan can provide you the benefit of low interest rates and long tenors.

Let’s you think big – Top-up Loans come with a high loan amount. Factors determining the maximum amount include the outstanding Home Loan balance, the market value of the underlying mortgaged property, and the lender’s terms and conditions.

Thus, if you already have a Home Loan running, a top-up is actually a good choice considering all the benefits listed above. If you are looking for additional loans to cover your expenses, it is highly recommended you go for a Top-up Home Loan.

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