Balance Transfer or Top-Up Home Loan?

If you require additional funds while servicing a housing loan, you can either opt for a top-up loan with your existing lender or you can opt for a home loan balance transfer and top-up with a new lender. While a top-up loan with your existing lender can help fulfil your monetary requirements, there are some additional benefits of opting for a home loan balance transfer and top-up.

Some of these are mentioned below:

Balance Transfer and Top-up Home Loan

  • A home loan balance transfer is a facility that allows you to transfer the outstanding loan amount from your existing lender to a new one. If you find a lender that provides housing loans at lower interest rates than your existing lender, you can consider opting for a home loan balance transfer. A lower rate can help you save a lot of money on interest payments.
  • When you opt for a home loan balance transfer and take a top-up loan, you can negotiate for better loan terms with the new lender. Moreover, the new lender is more likely to offer you a competitive interest rate on the top-up loan.
  • If you are not satisfied with the customer service of your existing lender, you should switch your lender via the balance transfer facility and avail a top-up loan with the new lender. Before choosing a new lender, make sure that they have an efficient and reliable customer support team.

However, if you require additional funds after having completed a significant portion of the repayment tenure with your existing lender, opting for a home loan balance transfer won’t be prudent. This is because while switching your lender, you may have to pay balance transfer charges. These charges can offset the savings made on the interest outgo.

Benefits of Top-up Loan

  • Regardless of whether you avail a top-up loan with your existing lender or a new one, the loan amount can be used for various purposes. If you utilize the top-up loan for specific reasons such as home construction, extension, renovation, etc., you can even avail tax benefits on your top-up loan.
  • Another benefit of a top-up loan is that the interest rate charged on it is much lower as compared to the interest rate on personal loans and gold loans. Additionally, top-up loans are available for a longer period than other unsecured loans such as personal loan, student loan, credit card, etc.
  • Since your housing loan is already secured, you won’t have to pledge any collateral while availing a top-up loan.

To avail a home loan in India, you are required to furnish all the necessary documents that the lender may ask for. Thus, if you avail a top-up loan with your existing lender, the processing time will be lower as the lender may already have your details and documents. Lastly, make sure that you read and understand the terms and conditions of the top-up loan carefully.