Everything You Need to Know About a Top Up Loan


Need urgent finances, but still paying off your Home Loan? Remember that you can simply apply for a Top Up Loan. With low interest rate and a longer repayment tenor, a Top Up Loan is your best bet at acquiring funds quickly. It is offered by your existing lender over and above your Home Loan based on certain eligibility criteria, and may be used by you in any way you choose. You may use the finances do something related to your home—be it home renovation, repairs, building an additional asset on your property, etc.—or for something completely unrelated. It could be to fund your own business, travel overseas with family, finance your child’s higher education or even for medical expenses. All in all, a Top Up Loan can be your source of additional financing when you need it most.

What you should consider before opting for a Top Up Loan

There are various scenarios where a Top Up Loan would work as the most favourable source of finance. However, considering that it is, after all, a loan, it does require you to pay interest. Since you are already paying off your Home Loan, opt for a Top Up Loan cautiously and only after considering the following factors:

Do you need the money?

This is the primary question you should ask yourself before applying for a Top Up Loan. It is important for you to closely consider how much you need and what you will utilise it for. Rather than opting for the maximum amount available, borrow just what you need, so that its repayment does not end up becoming a burden.

Calculate your income

Your income determines your capacity to repay a loan and keep making timely EMI payments. So get the calculations right and understand how much income you have left over after you take care of all your fixed expenses and your Home Loan EMIs. Analyse whether you have money for additional payments for a Top Up Loan, and go for it only if the answer is yes—but only after you save a small amount from your monthly income for emergencies.

Research whether you have alternative sources of finance

A Top Up Loan is not the only option you may have. Consider the sale of an asset, breaking a fixed deposit, or other sources of funding. Once you consider all alternatives, choose a Top Up Loan only if it is the most prudent and financially affordable option. Usually, experts do not recommend breaking or diluting a long-term investment for smaller financial needs.

How is a Top Up Loan amount calculated?

Since a Top Up Loan is only offered to existing Home Loan borrowers, it is dependant on your Home Loan in many ways. Your lender will assign you a Top Up Loan amount depending on the property value of your new home (usually capped at 60% to 70% of your home’s current value) and the outstanding Home Loan you are still paying off. It also takes into consideration your repayment history and repayment ability based on your income to arrive at the final amount that may be sanctioned to you. Thus, if you apply for a Top Up Loan about 3 years after you take the Home Loan, chances are that you will be approved for a Top Up Loan of a larger amount.

Benefits of a Top Up Loan

  • Lower interest rates: Interest rates have to be paid over any loan by the borrower. While the interest for other loans such as personal loans may be high, they are much lower for Top Up Loans. This makes Top Up Loans easier to repay.
  • Longer tenors: The tenor is the time over which EMI payments have to be made towards repayment of the loan. Top Up Loans feature long tenors that makes it easy for you to process timely EMI payments and repay the loan conveniently. Most Top Up Loans have tenors of about 10 years or more, depending on the time you have left on your Home Loan repayment.
  • Quick processing: Since Top Up Loans are borrowed over and above the Home Loan, the lender usually processes the loans faster as all documents are already present with the lender. This fast processing makes Top Up Loans the perfect source of money when you need it quick. Another advantage is that Top Up Loans are easy to apply for and do not need you to spend a lot of time filling out the application or attach documents.
  • Tax benefits: Tax savings on a Top Up Loan are based on the purpose for which the loan is being utilized. If it is used in order to construct or repair a home or part of the property, then you can get tax deductions on the Home Loan interest rates. Remember, the principal amount of a Top Up Loan does not offer any tax benefits.
  • Can be used for various needs: A lot of borrowers require Top Up Loans after the purchase of a home in order to renovate it, add to the property or for redoing the interiors. However, there is no restriction on the use of a Top Up Loan. You can use it for any purpose of your choosing.

Eligibility for a Top Up Loan

Lenders look at repayment history of your Home Loan and your income when it comes to approving requests for Top Up Loans. All you need is to have a good repayment record and enough income to support the servicing of the additional loan.

The documents for Top Up Loans are the same as Home Loan and include:

  • Address proof
  • Identity proof
  • Photographs
  • Details of income
  • Bank statements
  • Property valuation documents


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