Nobody can undermine the importance of owning a house. No matter what the advocates of renting-is-better-than-buying tell, fact is that buying a house gives a sense of ownership.
But houses are extremely costly. More so if you purchase them in larger cities. And since the prices are so how, one needs to take a home loan to purchase them. Once the loan is taken, a large chunk of your monthly salary will be going towards EMIs. This leaves very little money in your hand after you have taken care of other expenses too.
Now it’s possible that there is a sudden need of additional funds in your family. How will you take care of that if you don’t have any savings left (after using the money for downpayment)?
The first option is to take help of relatives. But that may or may not work. Next is to take a personal loan. But person loans are not cheap.
Luckily, there is another option – Top Up loan on home loan. The best part is that the interest rates on additional borrowings are much lesser than those on personal loans. Tata Capital itself has a facility where home loan borrowers can avail top-up loans at competitive rates.
Now of you think that why will a lender lend to you when you already have a large loan, then you are not alone. That’s a common question.
The answer lies in understanding one simple fact. When you take a housing loan, it is approved according to your loan eligibility. After some time and repayments, a part of the loan is already paid back. Your income too would have increased in the meantime. So your new loan eligibility would have gone up. So against the same collateral, you can avail a fresh (top-up) loan of an amount equal to the difference of current loan eligibility and existing outstanding loans.
This is the reason that if you need some additional funds and already have a home loan running, it’s better to take a top-up loan instead of a personal loan.