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When purchasing a house using a home loan, it is quite possible that you would want to apply for the maximum home loan amount that you are eligible for. Sometimes, you may require more funds on top of the existing home loan. In such cases, the best alternative is to go for a ‘top-up loan’. This is a great way to acquire more funds for financial support.
If you are an existing customer or have opted for a balance transfer of your home loan with a lender, you are eligible to apply for a top-up loan. Do keep in mind that a borrower needs at least 12 months of a clear repayment record. Therefore, if you are in need of extra funds and have been paying the EMIs of a home loan for at least a year, you can go ahead and apply for home loan top-up from the same lender.
One benefit of a home loan is that it offers a high Loan to Value (LTV) ratio. This ratio refers to the loan amount against the total value of the property that you would be purchasing.
As a borrower, you can easily get a top-up home loan since the lender already has all the required information and documents, thanks to the existing home loan. If you have a steady repayment record and are on good terms with the lender, the top-up loan can be processed without any delay.
Apart from using the loan amount for household-related expenses, this amount can also be used for numerous other purposes that include business requirements, funding your kid’s education, financing wedding expenses, and so on.
The interest rates of personal loans range between 9%-24% per annum, based on the credit record. Hence, taking a top-up loan could be a better option since the interest rates for top-up loans are only slightly higher than the existing home loan. So, for home loan borrowers, a top-up loan proves to be one of the cheapest credit options out there.
If you were to take a personal loan against a credit card or apply for a personal loan, you would have to complete repayment within 5 to 7 years. However, with a top-up loan, if the remaining repayment tenure of the existing home loan is 15 years, you can get the same tenure for a top-up loan too.
A top-up home loan is a great option to avail, if there is a need for additional funds. Before applying for this loan, make sure to read the fine print of the loan agreement.
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