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Top Up loan is better than personal loan

Top up home loans for emergency

Pankaj was suffering from the burden of the increase in the interest rate of his existing home loan for the last 1 year. Last month, he was forced to spend close to 5 lakhs to treat his sick father, for the treatment related to some heart ailment. He managed to get the amount from his friends but has to repay at the earliest.

He had the option of personal loan at an interest rate of 15%, but the EMI was 13,915 because the term of the loan was only 4 years. But he got a top up loan from his home loan provider for 12.25% that too with a repayment term of 10 years. The EMI works out to 7246/- which he can manage along with his normal EMI.

Top up Loans are better than Personal loans

Most banks offer top up loans or additional home loans to its existing home loan customers. SBI is offering this loan at 11.25%, while most other banks are offering this at 12% to 13%. The term of this loan can go upto the balance repayment period in the existing home loan. This will help you in getting a much reduced EMI compared to a personal loan.

Conditions for Top up loan

Lenders will normally limit the total outstanding home loan and the top up loan to 60% of the market value of the property, as per their valuation. Most lenders limit this loan to 10 lakhs. Other than the market value of the property, lenders consider the outstanding loan amount, your repayment history and repayment capacity before sanctioning the loan.

You can utilize the top up loan for any of your personal requirements. Procedure is simple in a top up loan compared to a personal loan, because you are an existing customer. While the interest rate is lesser compared to personal loans, the term can go up to 15 years, which makes this loan very attractive to customers. While personal loans are priced at 15-20% per annum depending on your credit score, top up loans are priced at 11.25% to 13.5%.

Try Secured loan options first

If you have LIC policies, you will get policy loans at an interest rate of around 9% with flexible repayment terms.  But this loan is based on the surrender value of the policy and the amount may not be sufficient for your needs in most cases. But this is one of the best options available now.

You can consider gold loan which charges between 11.25% – 24%. But the term of the loan is normally 1-3 years and may not suit your needs.

You can borrow against your stocks and mutual funds. But this is normally limited to around 45-50% of the value of the investment.

Top up home loans with the lower interest rate and long repayment term is a better option to meet any emergency requirements.

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11 Comments

  • Rahul Mehandiratta Posted September 20, 2012 6:38 pm

    Your advise is really great on various financial aspects. Do you have branches is it there is Chandigarh and if so what is the address.

    Rgds,
    Rahul Mehandiratta

    • admin Posted September 24, 2012 4:54 pm

      Thanks for the nice comments. We do financial planning online and can cater to customers globally. You may provide your contact details at melvinjo123@gmail.com or call me at 9820843739.

  • raj Posted February 11, 2013 11:10 am

    Can we get top up home loan on the flat which is vacant but which market price has gone double within the period of 2 years of time when home loan was taken ?

    • Melvin Joseph Posted February 13, 2013 5:48 pm

      The eligibility for a top up loan in this case will be decided based on your repayment capacity and repayment track record.You can apply.

  • sunil behl Posted March 14, 2013 3:26 pm

    Are the tax benefits u/s 80C and 24 of the Income Tax act available in respect of top up loans also?

  • Abhay Posted May 6, 2013 5:09 pm

    How many times a person can go for top up loan?

    • Melvin Joseph Posted May 10, 2013 10:13 am

      There is no limit on the number of loans.

  • Harish Girotra Posted July 6, 2013 10:21 pm

    Does the tax benefits available on top up loans on existing home loan?

    • Melvin Joseph Posted July 10, 2013 10:57 pm

      Yes, if Top up loan is taken for modification/extension of the house, you can claim the tax benefits.

  • Satheesh Posted January 17, 2014 10:12 am

    I have a LIC home laon for past 18 months, can i avail this top up, if so, what would be my eligible amt and what is the rate of intrest

    • Melvin Joseph Posted January 17, 2014 1:53 pm

      The eligible amount will depend on your income and the repayment capacity. Please contact the LIC housing finance.

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