5 advantages of benefiting from an additional home loan in the event of a financial deficit
Just like other consumers, existing home loan borrowers can also use additional credit facilities to finance major expenses like home renovations or renovations, car purchase, children’s higher education, etc. etc., or to meet financial demands. Sensing this need, mortgage lenders began offering complementary mortgage loans to existing borrowers without any end-use restrictions.
Here are 5 major advantages of having a complementary home loan over alternative options such as a personal loan, a loan against credit card, and a car loan, among others:
Lower interest rate
Interest rates for personal loans are generally around 10-24% per annum depending on the borrower’s credit profile and other criteria. The interest rate on a credit card loan is usually a notch higher than the interest rate on personal loans offered to a borrower from the same lender. However, in the case of top-up home loans, the interest rate is usually the same or a notch higher than the interest rate of the underlying home loan. This makes top-up home loans one of the cheapest credit options for existing home loan borrowers who are managing home loans at lower interest rates.
No restriction on end use of funds
Although top-up home loans can only be used by existing home loan borrowers, there are no end-use restrictions attached to them except for speculative purposes. The absence of end-use restrictions makes add-on home loans a great alternative to personal loans or credit card loans for existing home loan borrowers.
Longer repayment term
The duration of complementary real estate loans depends mainly on the residual maturity of the underlying real estate loans, with some lenders further capping the duration of complementary real estate loans at 15 years. The repayment terms for alternative credit options like credit card loan and personal loan are typically up to 5 years, with some lenders offering personal loans with longer terms of up to 7 years. Since a longer tenure leads to lower EMIs, opting for a top-up home loan can help reduce the burden of EMIs. Likewise, existing home loan borrowers who are looking for longer loan terms to finance their car purchase may also consider availing of top-up home loans.
Higher loan amount
In the case of complementary home loans, the amount of the eligible loan sanctioned by the lenders generally corresponds to the difference between the amount of the mortgage loan initially sanctioned and the remaining amount of the loan. Regarding the personal loan, the loan amount can vary between Rs 50,000 and Rs 40 lakh depending on the income and the repayment capacity of the borrower. The loan amount in the case of a loan against credit cards is usually a proportion of the credit limit of the credit card holder. However, some card issuers tend to offer credit card loans in excess of the credit card holder’s credit limit.
Therefore, the chances of getting a larger loan amount are much higher in the case of top-up home loans, especially for those who have already paid off a significant portion of the original home loan amount and have shown a repayment history. disciplined.
Fast processing and documentation
Lenders typically take 1 to 2 weeks to disburse additional home loans. Credit card loans are usually disbursed instantly or within a few hours of submitting the loan application, while personal loans are disbursed within 2-7 days. Some lenders also claim to offer pre-approved personal loans with faster disbursements. Therefore, personal loans or credit card loans would be suitable for those looking for faster loan disbursements.
However, some lenders have started offering pre-approved instant home loans in which they claim to disburse the loan amount on the same day as the loan application. So, those with existing home loans from lenders offering instant home loans may consider top-up home loans for quick financing.
(By Ratan Chaudhary, Head of Home Loans, Paisabazaar.com)