A home loan comes with several features and benefits which simplifies repayment even if you have availed a substantial amount.
For instance:
- The rate of interest is considerably low compared to unsecured loans.
- You can claim income tax exemptions of up to Rs. 2 Lakh on your loan interest as per Section 24(b) and up to Rs. 1.5 Lakh on the loan principal as per Section 80C.
- Lenders enable you to foreclose or part-prepay the loan without any additional charges provided you have opted for floating rate of interest.
Another feature that you get with a top up loans on home loans is when you avail balance transfer facility.
What is a Balance Transfer?
A balance transfer facility enables you to transfer the remaining balance of your existing house loan to another lender. The majority of borrowers opt for this facility to reduce their interest burden.
Many a time, another financial institution may be offering you a lower rate of interest. In such cases, transferring your home loan to that lender is more lucrative.
Home Loan Balance Transfer Calculator
Lenders provide a balance transfer calculator that tells you how much you can save availing this facility. You only have to enter the following information:
- Existing financial institution
- Property location
- Loan starting month and year
- Sanctioned loan amount
- Existing loan tenor
- Existing rate of interest
- New rate of interest
This calculator also tells you the top-up loan you are eligible for after you transfer your home loan balance. There are many benefits of a home loan balance transfer in India like lower rate of interest etc.
What is a Top-up Loan?
A top up loan is a loan without any end-usage restriction. You can utilise the funds for any purpose.
You may be in need of additional financing after purchasing or construction of your house. Such requirements may arise for interior decoration, buying furniture, electronic appliances, etc.
Or, you can utilise the money to make a big-ticket purchase or to arrange a wedding, go on an exotic vacation, consolidate debt, fund high education, etc.
Lending institutions offer top up loans when you avail their home loan balance transfer facility.
Reasons to Avail a Top-up Loan:
1. Easy to Avail than a Personal Loan
Availing a personal loan if you are in need of additional funding involves providing all the necessary documents, and satisfying all the terms.
On the other hand, you don’t have to go through such hassle and documentation process when opting for a top-up loan. The lender already has your documents required for a home loan, thus lowering the processing time even more.
2. High Financing Option
Financial institutions provide a loan amount that is considerably higher than a standard personal loan. For example, NBFCs offer up to Rs. 50 Lakh with their Top-Up Loans.
3. Longer Tenures
The tenor to repay the top up loan aligns with your home loan. For example, you get a repayment tenor of 15 years for the loan if you have the same period remaining for your home loan.
4. Lower rate of Interest
One of the primary advantages of availing a top-up loan is the lower rate of interest compared to an unsecured loan. The interest rates on the former are usually 4% or even lower than the latter.
5. Income Tax Benefits
Sections 80C and 24(b) are also applicable if you invest the loan in your house or for home renovation. You can also dedication on the interest paid on the top-up loan under Section 80E if you use it for educational purposes.
6. No Foreclosure or Part-prepayment Charges
You can also foreclose or part-prepay the loan at any time against no extra charges if you are paying a floating rate of interest.
Do note that you have to pay a processing fee when availing a top-up loan from a new lender. The company may also charge a processing fee for a home loan when you transfer the balance. There may also be other charges associated with this loan. Hence, make sure you know all about top-up loans before you opt for one.
