Home finance has been gaining increasing popularity. Potential homebuyers can secure funds under home loans and repay them over their desired loan tenor through EMIs. Home loans offer several benefits, including affordable home loan interest rates, tax benefits, and potential high return on investment. Today, many lenders offer the option of a home loan top up on home finance. 

What is a Home Loan Top Up?

A home loan top-up is an additional loan amount that home loan borrowers can secure on their existing home loan. However, lenders do not extend this facility to every loan borrower. To be considered eligible for a home loan top up, you must meet the following eligibility criteria:

1. These loans are available exclusively to individuals who already have a home loan account with a financial institution.
2. Lenders check the credit score of the loan applicants and only those individuals whose credit score exceeds 725 are considered eligible for these loans. A high credit score indicates high repayment capacity, high creditworthiness, and a higher chance that the borrower will repay their loan without defaulting on loan repayment. 
3. Additionally, home loan top-ups increase the borrower’s EMIs. As a result, these loans are offered only to borrowers with sufficient income who can afford the additional EMI from the top-up loan. 
4. Lastly, the loan applicant must meet the age-related qualifying criteria for these loans, which generally range from 23 to 70.

Let us now look at the benefits of home loan top ups.

Benefits of a Home Loan Top Up

Here are some of the benefits associated with home loan top ups.

1. One of the biggest benefits of a home loan top-up is that the loan borrower can use the secured funds to take care of any home-related expenses. For instance, if you want to use the loan funds to buy new furniture or even add another room or area to your property, you can use the funds secured under home loan top ups to do so.

2. Yet another advantage of a home loan top up is that borrowers can secure these loans at highly competitive interest rates. With a strong credit profile and a clean repayment history, borrowers are offered an interest rate only slightly higher than their existing home loan rate. Affordable interest rates make home loan top ups a highly beneficial loan option.
3. Home loan top ups also provide an opportunity to improve CIBIL score. The CIBIL score is a credit score assigned to loan borrowers by TransUnion CIBIL, the most popular credit information agency in India. The CIBIL score reflects a loan applicant’s creditworthiness and repayment capacity. A high CIBIL score indicates high creditworthiness and repayment capacity. Individuals with a CIBIL score above 750 not only get approved for credit quickly but are also extended credit at the most beneficial loan terms. When a loan borrower avails of a home loan top-up and repays it on time, their credit score improves automatically, ensuring easy access to credit at the best loan terms in the future.
4. Home loan top ups also come with a long repayment tenor. The repayment tenor is normally as long as the remaining tenor on one’s home loan. The long home loan repayment tenor further makes it easier for loan borrowers to repay the loan comfortably, through affordable home loan EMIs. 
5. Home loan top ups are approved and disbursed quickly. The waiting period for these loans is quite short, primarily because borrowers apply for these loans to financial institutions that already have a fair idea of the loan applicant’s repayment capacity. Further, the financial institution already has all the documents they need to process the loan, which makes the whole process straightforward and quick.

Conclusion

Home loan top ups have been becoming increasingly popular as an additional loan option. These loans are extended to individuals who already hold a home loan account. Eligibility requirements for these loans revolve around factors, such as credit score, income, age, etc. Low interest rates, flexible repayment tenor, tax benefits, and quick processing and disbursal are some of the factors that continue to add to the popularity of these loans. However, borrowers must commit to an additional top-up loan only if their income comfortably supports the additional EMIs.