When you want an additional loan while you have an ongoing home loan, it is called a top-up loan. This type of loan comes with low-interest rates, long tenure, and even quick transaction processing. That is why they are a much wiser choice than opting for a new loan altogether.
Top-up loans also come with a set of tax benefits that helps you make a sensible financial decision without wasting any time. Let us learn more about these loans as we read.
What Are The Tax Benefits Of Top-up Home Loans?
Borrowers can save sufficient amounts of tax on these top-up loans. However, this is only possible if the funds are utilized for the residential property’s repair, expansion, and building. If you have a self-occupied home, there will be a tax deduction of nearly Rs. 30,000 available on loan.
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If the loan was to be obtained for a rental property, there will be a restriction on the deduction. If you make the most of this top-up loan to purchase or build a new home for yourself, the interest components will be tax-deductible alongside the principal under Section 24 (B) and 30C. But remember that if these funds are used for repair, alteration, or any form of residential property renovation, then only the interest component will be considered for deduction.
Ensure all your necessary documents and receipts are up-to-date for a seamless tax benefit claim. Otherwise, this claim cannot be possible.
What Are The Benefits And Features Of A Top-up Home Loan?
Generally, personal loans have a short tenure period that can be inconvenient for you when you wish to pay off your loan. However, a top-up loan makes it easier to pay off loans as the tenure period is longer. The tenure can extend up to 20 years.
2. Lower Rate Of Interest
In a personal loan, your interest rate can be high. So, when you have to pay off the loan, you might face many financial problems. This is not the case with a top-up home loan. Here, your rate of interest is comparatively lower than a personal loan. So, you can enjoy better flexibility.
3. Larger Loan Amount
Anyone can obtain a loan amount up to Rs. 50 Lakhs when acquiring a top-up home loan. This means the loan rate you can acquire here is much higher than the ones you can obtain on general loans. But you need to ensure that the top-up and outstanding loans are under the bank’s policies.
4. Quick Processing
Top-up loans have easy transaction processing that does not accompany hefty background checks. That is why most people wish to opt for this type of loan for maximum convenience in need.
5. Useful For Various Purposes
This type of loan can help you utilize your finances for home renovation, weddings, education and so much more.
Speak to your financial lender about such top-up loans beforehand to avoid any room for complications. In most cases, you are bound to have a seamless experience when opting for this loan.