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Topup loans can be used for renovating homes

While most people take a home loan to purchase a house, there are also several expenses involved, such as interior work and other miscellaneous costs. To meet these expenses, you can opt for a top-up loan. Although many people choose to take a personal loan instead, the interest rates on personal loans are usually higher as they are unsecured. Compared to a personal loan, taking a top-up loan on a home loan is easier and more affordable.

How does a top-up loan work?
Let’s understand it with an example. Suppose you have taken a home loan of ₹50 lakh for a tenure of 10 years. You have been paying the EMIs regularly for two years when you require additional funds for home renovation. To fulfil this additional funding requirement, you can opt for a top-up loan. This loan is the additional debt taken on the existing loan.

How to apply?
To avail a top-up loan, you can apply at your current bank, i.e., the bank from which you have taken the home loan. This facility is available only to those customers who already have a home loan. The top-up loan is offered based on factors such as the market value of the borrower’s property, repayment track record, and a good credit score. Additionally, the interest rate applicable to the top-up home loan also depends on the borrower’s background and credit score. Each bank may have different interest rates for top-up loans. Once your application is approved by the bank, the additional amount is deposited into your account.

Benefits of a top-up loan
The application and approval process for a top-up loan is quick and easy, as you already have a relationship with the lender, which reduces the documentation requirements.

Cheaper than a personal loan
Generally, top-up loans are provided at a lower interest rate compared to personal loans or at a slightly higher interest rate. However, if you have a good relationship with your bank and have been repaying the original loan on time, you may be eligible for a top-up loan at a lower interest rate. Therefore, for fulfilling financial needs, a top-up loan proves to be a better option than a personal loan.

Option to pay EMIs together
When you take a top-up loan on your existing loan, you have the convenience of paying the EMIs for both loans together, enabling you to easily manage the installments on time