Making your financial dreams come true can sometimes require a helping hand. Be it to renovate your home, start a business, plan a lavish wedding, or any other lofty goal, having the requisite funding is essential. When it comes to loans taken for housing purposes, your long term goals can change. Perhaps you took out your loan five years ago, and now you wish to renovate your house. What should you do if the loan amount doesn’t suffice? This is where a top-up loan comes in.
A top-up loan is an additional help on top of a pre-existing loan that is provided by banks and financial institutions which can help you fulfilyour goals through extra financial aid. To be specific, a top-up loan works by being added over and above your home loan amount. Similarly to how you top-up your mobile balance when you run low, banks also offer a top-up facility over your current balance. Most lenders offer a top-up facility. If your lender does not give you the option to top-up your home loan, you can always transfer to a lender that offers this facility.
Let’s understand how a top-up facility will work well using the aforementioned example of home renovation. Let’s say you took out a home loan of ₹50 lakhs payable over a ten year period. Five years into your loan repayment, assume your outstanding principal on this home loan is ₹28 lakhs. However, if you are considering a major home renovation, this amount might not be enough. You have multiple options. You could purchase a fresh personal loan to finance your renovation, or you could opt for a top-up facility. In most cases, the top-up facility would be the cheaper option worth considering.
Top-up loans have the following characteristics. Use the following pointers to navigate whether they are worth considering.
A top-up loan can be exactly what you need to fund your home’s renovation. It is added over and above your pre-existing home loan policy and can come out to be cheaper than taking on a separate personal loan.
[Also Read: How to Apply for Home Loan Online?]