Home loans are an easy way to purchase your dream home. But what if you need money over and above the home loan you are servicing? You can either avail of other loans like a personal loan or gold loan or take a home loan top up.
While all three can fulfil your needs financially, it is vital to choose the one that is not adding to the hassles of managing your debts. A top-up home loan is convenient to avail of and easier to manage. Experts opine that if you have high loan eligibility, it could be better to opt for a top-up home loan than availing of other loans with higher interest rates.
Ahead are some benefits of top-up loans over other loans, but first, find out what a personal loan and gold loan is.
A personal loan is an unsecured loan that you can avail to fund your financial needs. There is no end use for personal loans and it can be used for any purpose. As you do not submit any collateral to avail personal loan, the interest rates are comparatively higher.
A gold loan is a secured loan where you can borrow money against your gold articles. You can pledge gold coins, biscuits or jewellery as collateral to avail a gold loan. The loan amount depends on the market rates of gold and can vary from lender to lender.
What Is a Top-up Loan?
An amount of money that you can borrow over and above the existing home loan is called a top-up home loan. A top-up loan has similar features and eligibility as to that of a home loan. Depending on the lender, you might be able to avail of a top-up loan for the remaining tenure of your housing loan. To avail of a top-up loan, you must be an existing home loan borrower.
Benefits of Top-up Loan over the Gold Loan and Personal Loan
- Tax benefits
You can claim a tax deduction on a top-up home loan if you use your top-up loan for a purpose related to a house property like repairs, renovation, acquisition, construction improvement, extension. However, there are no tax benefits on a personal loan or gold loan.
- Longer tenure
The tenure of a top-up home loan is concurrent with that of your remaining home loan. Therefore, you can take the top-up home loan for the entire remaining tenure of the home loan. Gold loans and personal loans usually have a shorter tenure as compared to a top-up loan.
- Lower interest rates
Loans like personal loans and gold loans have higher interest rates than a top-up home loan.
- No additional collateral
With a top-up home loan, you need not submit any additional collateral. As the lender already has all your documents, it could be easier and simpler to avail of a top-up home loan.
While you are already servicing a home loan, it could be a better idea to avail of a top-up loan instead of new loans like gold loans and personal loans. To avail of a top-up home loan, you can request the lender and fulfil the required formalities. Alternatively, you can also contact other lenders for top-up loans if they offer lower interest rates.