With an increase in urbanisation and a plethora of governmental initiatives, India has had a rising trend in availing home loans. With numerous individuals purchasing or building their homes with the help of financial and other aids, funding that was ranging around 16% in the financial year 2017-18, came up to around 19% in the following year of 2018-19. With this increase in the number of home loan borrowers, there have also been enquiries about further lines of credit being available for these individuals.
In this same regard, a top-up loan is a convenient financial tool which is offered by a few financial institutions in India. While borrowers need to understand its features, firstly they must note that such loans can only be availed if an individual transfers his/her home loan balance to a different financial institution. Typically availed by borrowers to reduce their financial burden on loan repayment, balance transfer allows them to avail a lower interest rate on their home loan.
Additionally, housing loan balance transfer also offers the option to reduce loan tenor by renegotiating EMI amounts with the relevant financial institution. Any individual who opts to transfer his/her home loan should check if their financial institution offers an additional line of credit with these following benefits as a top-up advance.
- High financing amount: While home loans offer up to Rs.3.5 crore in credit, these additional lines of credit offer up to Rs.50 lakh, which is added to the total credit balance. This high amount of financing allows a borrower to fulfil other financial necessities since these loans do not have any end-use restriction.
Furthermore, the rates of interest applicable to this top-up amount after home loan transfer is typically quite low since it becomes a part of a borrower’s existing secured loan.
- No documentation required: When an applicant avails a home loan, they must provide personal, financial, employment and property documents for its approval. Consequently, when he/she transfers this existing loan to a different financial institution, all necessary verifications are already confirmed. As a result, when applying for a top-up advance, borrowers do not need to provide any documents.
- Prompt disbursal: With no verification process involved in its approval, top-up loans are typically disbursed promptly. Applicants generally receive disbursal of their approved amount within 24 hours of approval.
- Option to prepay: Financial institutions offering home loan transfer usually also offer their borrowers an opportunity to prepay their home loans. While there are quite a few important factors to keep in mind while prepaying a home loan, borrowers can avail this feature to reduce their interest repayment amount by a significant margin.
They can pay a lump-sum amount of money to their financial institution to clear their full loan balance or a substantial portion of it. This former option is known as foreclosure, while the latter is termed as part-prepayment.
- Tax benefits: Similar to their primary home loan, borrowers can also avail tax exemptions under section 24 of the Income Tax Act if they utilise it for house construction. This provision allows a borrower to claim tax deduction up to a maximum of Rs.2 lakh on their interest.
Potential borrowers who are checking every possibility should also note that some of these features are an extension of their primary housing loan. As individuals who are about to apply for a secured line of credit, potential applicants can check pre-approved offers.
Borrowers who require additional financing should especially consider top-up loans since this keeps their credit line under one head, making them easier to maintain. Before applying for it, however, borrowers should use a top-up and home loan EMI calculator. These online devices can be used to check the total repayment amount along with individual EMIs, which can help manage finances conveniently.
