When you have taken out a loan, a top-up is an additional advance over and above the existing loan amount. Such a facility is popularly termed as top-up loan. It is particularly helpful when borrowers need new credit, but do not seek to avail external financing. As the borrower's credentials are already submitted to the lender, securing top-up is hassle-free and less time-consuming.
Here are some of the dominant reasons why a top up loan can be a favourable option -
Faster processing and disbursal
Since this additional credit facility is availed from an existing lender of home loan, both the verification process and fund disbursal happens quickly. All the relevant documents of the borrower have already been vetted.
Simpler criteria
While borrowers opting for balance transfer can readily avail a top-up loan, it involves the simple CIBIL score criteria 750 or up, and a healthy credit repayment history.
No-end use restriction
One of the major advantages of this additional credit is that there is no restriction on final utilisation of this fund. You can use to it meet any requirements, which may or may not be related to housing. For example, you would have the liberty to use it for interior decoration or to meet a medical emergency.
No further collateral
Borrowers are not required to submit any other collateral apart from what has already been mortgaged while taking out the home loan. Naturally, this credit line is a favourable option among borrowers.
Easy interest rate
The interest rate on top-up is relatively lower than other unsecured loans, making this credit facility more cost-effective.
Income Tax benefits
Borrowers can enjoy income tax benefits for funds available under this credit facility if used for a home extension, renovation, construction, etc.
Should you seek to derive the full benefit of this credit line, find out about the top-up loan option on the home loan offered by your lender, and streamline your plan to use funds, accordingly.
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