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Should you go for a top up home loan over a gold or personal loan?

Many people smoothly pay their home loan EMI. Then, one day they realize they must remodel their home. If you are one of those looking to renovate your house, the amount of funds at your disposal is the deciding factor about the extent of remodelling of the home. Many make the mistake of taking a personal or gold loan. In fact, the best solution is a home loan top up. Let us find out what a top up loan is and how you can take advantage of this simple product to make your dreams come true.


Home loan top up

All existing home loan borrowers can finance their need for extra funds by securing a top up loan. This is an additional loan which is given over and above your existing home loan. This money can be used for various personal and business-related needs. You can utilize a home loan top up to do home renovation. You can spend it on your child’s higher education. You can also make use of the money for financing business operations.

You can avail the top up loan facility if you have a consistent repayment record, and have paid a minimum number of home loan EMIs. If your existing home loan lender does not give you a home loan top up, try to opt for a home loan balance transfer with the top up option with the IDFC Bank under the simple home loan product.


Top up loan vs. gold, personal loan

Below are some areas which should be evaluated before you decide which loan you want to take.
1. Loan tenure - The tenure of a home top up loan can be much longer than gold or personal loan. This is because a top up loan tenure depends on your remaining home loan tenure. Instead of 3-5 years, a top up loan can have tenure of 10-15 years.

2. Interest rate - All loans carry an interest rate. A home loan top up interest rate is cheaper than a gold or personal loan. This is because a top up loan interest rate is only 0.5% to 1% higher than home loan interest rates. At this moment, a home loan interest rate is as low as 8.3%-8.4%. This means home loan top up interest rate would be 8.8%-9.4%. This is much cheaper than a personal loan interest rate of 11%-24%. A gold loan's interest rate comes anywhere between 10% to as much as 26% in some cases.

3. Quick loan - Any other loan option like personal loan, gold loan, and loan against the credit card can be given within 24-48 hours. Since a home loan top up is much cheaper, but still part of a home loan, they can take a week's time. However, the good thing is for any kind of purpose, 7 days is a not a very long time, especially if you are getting a much cheaper loan.

4. Tax benefit - A home loan top up can get you tax sops. While the interest and principal repaid on a personal loan, a gold loan or a loan against credit card are not qualified to give you any tax benefit, a home loan top up can. This is especially effective if the loan proceeds are used for the construction or purchase of new property.

As it is very clear, a home loan top up is an excellent avenue to raise funds. Given that a personal loan or a gold loan is quite expensive, especially if you intend to run the loan for some time (very few people can repay within 1-2 years), it is probably time for you to go from 'what is top up loan' to 'how to get a top up loan'. With a range of benefits including, attractive home loan top up interest rate, go for a home loan top up to fulfill your dreams and still be in complete control of your financial journey.