What Is A Top Up Home Loan: Is There An Inexpensive Debt?

Generally speaking, a top-up loan gives you the chance to acquire additional funds on top of the existing home loan, which may be beneficial in emergency situations. One can apply for top-up loans for both personal and professional purposes, such as dream vacations, children's schooling, marriage, and much more. A top-up home loan can be applied for by any customer who already has an existing home loan, with its maximum term being 15 years. Based on an interview conducted with Pramod Kathuria, Founder and CEO of Easiloan, here you can know all about top up home loans in brief. We have asked him a set of questions on top up home loans and the answers have been filed here.

Q.1 How does top up home loan work?

A top-up loan provides the opportunity to obtain additional funds on top of your existing home loan, serving as a valuable resource during times of necessity. This provides flexibility and convenience, enabling borrowers to utilize it for diverse purposes, spanning from home renovations, registration fees, or even purchasing furniture.

Q.2 Is there an inexpensive debt?

Yes, top-up home loans are typically secured by collateral, the interest rates on top-up home loans are typically lower than those on unsecured loans like personal loans or credit cards. This positioning makes top-up home loans one of the most cost-effective borrowing choices for individuals with existing home loans.

Q.3 What should be the tenure and what will be the interest cost?

Top-up home loans offer repayment durations comparable to your initial home loan. Borrowers have the flexibility to align the repayment period of the top-up loan with the remaining tenure of their initial home loan. The repayment period for top-up home loans usually goes up to 15 years, with some lenders offering loan tenures of 20 or even 30 years. The loan tenures for top-up home loans are usually higher than that of personal loans, which enables borrowers to select longer repayment periods for paying off their loans. This feature proves advantageous as it allows you to access funds at a lower interest rate, coupled with an extended repayment duration. The rate of interest usually varies from 8.7%-10.5%, depending upon the lender.

Q.4 Should these be repaid quickly or should they be overleveraging?

Borrowers should pay top-up home loans quickly and should exercise caution to avoid overleveraging. A potential drawback of these loans may arise if the borrower opts for an extended repayment period for the top-up loan. Choosing a personal loan with a higher interest rate and repaying it within two years results in paying less compared to opting for a top-up loan, which stretches over a longer duration.

Q.5 Other loans you may consider with home loan top-up?

If you don't have an existing home loan, exploring alternative secured loan options like a loan against property or a gold loan can be worthwhile. Reserve opting for a personal loan, which usually has higher interest rates, as a last only if you lack other assets to pledge.

Disclaimer

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