Lenders offer several facilities to make the home loan process easier for borrowers. A top-up loan and balance transfer are two of such facilities. Here’s a guide to top-up loan and balance transfer.

What is a top-up loan?

A top-up loan is an additional loan amount given to the borrower above the existing loan. Lenders offer a top-up loan to borrowers who are regular with their EMI payments.

A top-up loan is usually granted at 70-80% of the cost of the property. Since the loan’s end purpose is open-ended, you can use the funds to cover any expenses like your child’s wedding, travel requirement, medical emergency, etc.

Here are the benefits of getting a top-up loan.


#1 Lower interest rates

The interest rates on top-up loans are usually similar to the home loan interest rate you are already paying. Since the loan is already secured with your house as collateral, you can bag more competitive interest rates.


#2 Quick processing

Since you are an existing customer, the lender already has your details and the required paperwork. This makes the loan processing swift and easy.


#3 Longer tenure

Top-up loans typically have extended tenures between 5-30 years, similar to your home loan. This way, you’ll pay smaller EMIs, which also translates into increased home loan eligibility.

What is a balance transfer?

A balance transfer is a process where the outstanding amount of the existing housing loan is transferred from one lender to another. Borrowers often opt for balance transfer for better loan terms like flexible tenures, attractive home loan interest rates, etc., and reduce the overall debt burden.

Take a look at the various advantages of a loan balance transfer.


#1 Cost benefits

The most common reason why borrowers opt for a balance transfer is to get lower interest rates. A decrease in your rate of interest will lower your EMI payments and total interest payable, resulting in more savings. Since housing loans involve long tenures and high principal amounts, even a slight difference in interest rates can help you save a chunk on interest costs.

Before you go for a balance transfer, you can determine your potential EMIs and future monthly expenses using a home loan EMI calculator. Compare various loan offersto choose a lender allowing the most savings.


#2 Better services

Another reason why you can take a balance transfer is to get better customer service. If you’re getting benefits like quick loan processing, swift disbursal, top-up loan facility, and competitive loan terms, you can easily make the switch.


Summing up

Loan repayment and proper management of monthly expenses can be quite overwhelming at times. But, with provisions like housing loan balance transfer and top-up loan, all your home financing needs can be covered. Where a balance transfer makes your repayment more budget-friendly, a top-up loan can help finance additional expenses.