A recent study by an online portal has revealed that the average home loan amount in India currently stands at Rs.26 lakh in 2020. It is a significant increase from 2019’s Rs.23 lakh average valuation. However, the restriction on the usage of funds means individuals need access to additional funds to meet associated expenses.
Top up loans can solve this requirement. It is an additional feature of home loans, which allow borrowers to avail extra funds to meet an array of requirements. Nevertheless, individuals need to consider a few things before going ahead with the application.
7 things to know before availing of a top up loan
Since home loan top-up has no restrictions over its usage, one can use it to meet various requirements. Here are some pointers that applicants can keep in mind prior to availing one –
1. Maintaining a good repayment history
It is important to maintain a good repayment history to secure a top-up loan without any hassle. Lenders consider such borrowers as responsible ones and extend the additional funding as per their requirements.
Moreover, individuals can also leverage it to negotiate a more competitive interest rate.
2. Find the exact loan amount
Financial institutions may offer a significant loan quantum based on the borrower’s credit profile. However, availing more than what is required is not an ideal thing to do, as it increases the total debt and subsequently the EMIs. Therefore, individuals should calculate and find the exact loan amount necessary before making an application.
3. No additional documents required
With this financial product, one can forego the hassle of documentation and application process. Lenders already have the required information, which is why they can process an additional request without any delay.
Furthermore, borrowers can also streamline their initial home loan application process by opting for a financial institution that extends pre-approved offers. Such offers shorten the loan application and save time. It is applicable to financial products like home loans, loans against property, etc. Applicants can check their pre-approved offer within a few seconds by submitting their contact details.
4. Consider other charges
Every loan incurs some charge, and a housing loan top-up is no exception. Hence, borrowers can evaluate such expenses in advance to learn their total cost of borrowing.
5. The loan amount
The loan value here depends on the amount that one has already repaid in his/her home loan. For instance, in the case of an Rs.50 lakh home loan, where a debtor has already paid Rs.20 lakh, then the top-up loan amount will be a percentage of the paid amount. Moreover, this calculation varies from one financial institution to another.
6. The loan tenor
An interesting point to know about this financial product is that the loan tenor remains the same as the existing home loan. Therefore, borrowers get an extended period to repay their credit, which is a notable benefit of a top-up loan.
7. The interest rate
Interest constitutes a significant portion of any credit repayment, and with top-up loans, borrowers can avail a lower interest rate. Usually, it remains 1-2 basis points of the actual home loan scheme. Nevertheless, individuals must check on this pointer before moving ahead.
Top-up loans are a great way to source the required funds to meet an array of requirements. Moreover, its quick processing and disbursal further increases the borrower-convenience and allow them to fulfill any urgent financial need immediately.