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Top-up loans allow you to borrow money over and above existing loan plans. This is a facility provided by banks, housing finance companies and other financial institutions to help you fund bigger expenses. One can either request for a top-up from the existing lender or transfer it to a new lender with a request for a top-up.
“It’s an age-old pattern observed amongst borrowers. They tend to switch existing lenders when looking for a top-up plan. Also, sometimes when people spot lower rates with other lenders, they’d like to opt for it as it may lower the financial burden,” Manoj Trehan of Trehan Home Loan Consultants said.
It’s important to understand that not everyone who gets their loans transferred does it for lower rates. Often, the existing bank doesn’t agree to a top-up request and borrowers have to look for options outside. However, the terms and conditions of each lender vary and it’s important to evaluate all the options before settling for one.
When you apply for a home loan transfer, do thorough research about company policy and their top-up schemes. Every bank has a different policy when it comes to loan top-ups.
According to data from PaisaBazaar.com, India Bank offers a top-up up to Rs 60 lakh, while Canara Bank offers Rs 25 lakh. At the same time, the country’s largest lender State Bank of India doesn’t have any limit for top-ups. The bank looks at factors like income and creditworthiness for home loan top-ups.
Meanwhile, certain banks also have limited tenure for top-ups like the Bank of Maharashtra gives a top-up home loan for up to 15 years while both Punjab & Sind Bank, as well as Canara Bank, offer it for a maximum of 10 years.
Some banks, like Axis Bank, would offer top-up for the period left to repay your existing home loan. This means, if your primary home loan has 5 years left for repayment, a top-up will be provided for the same tenure.
The time period of the loan directly affects your monthly EMIs. However, you must remember that the longer the duration of the loan, the more interest amount you’ll have to eventually pay.
“It is important to understand your financial capacity first. Then look for what various lenders are offering and don’t settle for someone fulfilling your immediate needs. The loan will stay for a long time and you must look at a top-up loan exactly in that view,” Trehan added.