Property prices in India are on the rise. In most metropolitan cities, purchasing property is almost impossible for the average citizen unless they avail a housing loan to finance their purchase. However, one major problem with this approach is that while you repay the substantial credit, you would have limited access to funds even in case of emergencies. A top-up loan can help reduce such financial burden, keeping you free from stress during the loan repayment tenor.

What is a top-up loan?

A top-up loan refers to a credit offered by the lender over and beyond your existing home loan. People avail such loans to deal with financial emergencies, such as payment of medical bills, home renovation expenses, and education fees. Top-up credit is different from personal loans as you can only avail the former loan when you are already repaying a home loan.

Another crucial thing about top-up loan application is that you need to direct your applications to your home loan provider and not towards other financing companies. If you have been paying your housing loan installments on time, the lender can approve your request for additional funds.

  • Eligibility criteria for home loans

Before loan application, consider whether you are eligible to receive such credit. Look at the criteria below.

  1. You need to have an on-going home loan repayment.
  2. You must maintain a good track record when it comes to paying home loan installments on time.
  3. You must enjoy a healthy CIBIL rating of not less than 750 points. Your credit score is one of the factors that can affect your home loan eligibility as well.
  4. You must have adequate income to repay the top-up loan on top of your existing housing loan.
  • Why should you avail top-up credit?

Top-up loans are important and popular financing options for home loan applicants. These loans can act as a quick and easy source of money for individuals already repaying their home loans. Listed below are some reasons why such additional loans are useful.

  • No need for additional collateral

Lenders provide top-up loans on your existing home loans. Therefore, you do not need to pledge an asset as collateral for this line of credit.

  • Balance transfers lead to top-up loans

Some financial institutions in India offer top-up loans when you opt for a housing loan transfer from another lender.

  • No end-usage restrictions

You can choose to use the top-up funds as per your wish and needs. You do not need to disclose the reason to avail such loans to the lending institution. This makes the loan availing process streamlined and easy to follow. Therefore, fulfill your urgent needs freely with a top-up loan.

  • Top-up loans are secured credit

Unlike personal loans or other forms of credit, your lender provides top-up loans against your home or property. Therefore, the security leads to lower interest rates and helps reduce the loan repayment burden on you.

Keep in mind that you should not opt for a balance transfer on your home loan just to avail top-up loans. Use balance transfer calculators to judge whether such a move is beneficial to you in more than one way. Reputed HFCs often offer additional benefits for such transfers.

While a top-up loan is exceptionally useful, ensure you have the necessary earnings to handle the interest on such loans.