Top-up loans offer a few additional features compared to personal loans, which make them an exceptionally suitable option for borrowers of home loans. An individual can avail a top-up loan to meet different financial necessities without the hassle of applying for a new loan. In case their financial institution does not offer this feature, they can choose to transfer their loan account to a different lender to avail the benefits of this feature.
No end-use restriction
Top-up loans have no restriction on the purpose for which the money can be used. Consequently, borrowers can avail it for any financial necessity, be it medical, academic pursuits, home renovation, travel, and more.
No hassle of additional document
A major advantage of this loan is that no additional documentation is necessary to avail the funds. This makes the approval and disbursal process quicker.
A secured line of credit
This is a secured line of credit which is simply added to the existing home loan account. As a result, the interest rate applicable to these loans is also quite economical, with a lengthy tenor for repayment.
Tax benefits
Borrowers can avail different tax benefits on their top-up loans, depending on the purpose for which the funds are used. Under the Income Tax Act, Section 24(b) offers exemptions for the renovation of houses while Section 80E offers such benefits for educational purposes.
In case an individual is considering to transfer a home loan balance account to a different financial institution to avail a top-up loan, they should also check the rates of interest which is being offered. Transferring a loan balance should only be done if better rates of interest are offered by the new financial institution.
