After a home loan, do you need a personal loan? This is a cheap loan solution...it will save money and offer a longer tenure.

The high interest rates and short tenure of personal loans can be a burden on your pocket. If you already have a home loan, a home loan top-up is a better option. It offers benefits like a lower interest rate, a longer repayment period, and tax benefits.

Anyone can suddenly need money. In such situations, most people turn to personal loans. While they are easily available, their high interest rates and short tenure can be a drain on their pockets. But did you know that if you already have a home loan in your name, you have a 'smart solution' that is much cheaper and more beneficial than a personal loan? We're talking about a home loan top-up. This is an additional loan on your existing home loan that meets your financial needs and saves you from the burden of expensive EMIs.

What is a home loan top-up?

A home loan top-up means borrowing more money on top of your existing home loan. Suppose you have a home loan of ₹40 lakh and have been paying its EMIs on time for a few years. Now, you need another ₹5 lakh for home renovations or your child's wedding. In this case, you can take a ₹5 lakh top-up from your bank on your existing home loan. This is essentially increasing your home loan limit.

Why is it cheaper and better than a personal loan?

A home loan top-up is a type of personal loan, but it's linked to your home loan. Because your property is already mortgaged to the bank, the bank considers it less risky and offers it at a lower interest rate. The term of your top-up loan also depends on the home loan. Since home loans are often long-term, you have a longer repayment period. A longer term reduces the EMI burden, allowing you to repay the loan more easily.

Benefits of a Top-Up Loan

Use the money anywhere.

Like a personal loan, you can use the money received from a top-up loan for any purpose, such as home renovation, children's education, weddings, medical emergencies, or business needs.

Tax Benefits

If you use this money for home repairs, renovations, or new construction, you can claim tax deductions on the interest under Section 24(b) of the Income Tax Act and on the principal amount under Section 80C.

Much Less Paperwork

Since your home loan is already in operation with the same bank, the bank has all your documents. This makes the top-up loan process much faster and easier. You don't need to do a lot of paperwork.

No Additional Security

You don't need to pledge anything separately for this loan, as it is offered on top of your existing home loan.

Conditions for a Top-Up Loan

Good Payment Record: Your home loan EMI payment history should be clean and you should never have defaulted on any EMI.
Property Market Value: The top-up amount you receive also depends on the current market value of your property. Typically, banks offer up to 70-80% of the property value for the total loan (existing home loan + top-up).

Income and Credit Score: Your current income and a good credit score further strengthen your chances of getting a loan.

How to Apply? (Step-by-Step Process)

Visit the bank branch where you have your home loan or apply for a top-up loan online. You will need to provide the purpose for which you are taking the loan. The bank may ask for some basic KYC and income-related documents. After reviewing your record and property value, the bank will approve the loan and transfer the amount to your account.