Hyderabad: There is an exemption for principal and interest amount paid on housing loans under Section 24 and Section 80C of the Income Tax Act. A tax deduction can be availed when you utilise the top-up loan either to build or buy a home. So, when taking a top-up loan, you need to establish that the amount was used only for the said purpose with supporting documents to claim exemption.
It is long-term...
It could be a personal loan or money borrowed on gold, the duration for repayment would be anywhere between 1 and 15 years, depending on the loan conditions. While top-up loans would be slightly different from them since it is linked to the term of housing loan. For instance, if the term of the housing loan is 20 years, then the term of the top-up remains the same. Enabling you to easily repay the loan in the long run, based on bank regulations.
Overdraft
If you need money once in a while, then borrowing the whole sum amount will not serve your purpose. Instead, avail overdraft facility on the top-up loan. Some banks offer overdraft facilities on the housing loan, but the interest rate would be slightly higher than a home loan, still less than a personal loan. At the same time, it offers the advantage of taking money only when needed for a long period of time. So, a home loan with an overdraft facility is key.
Easy sanction
Already, the bank has all the details about the borrower and they also know the payment track record of the customer. The borrower has to submit records of his EMI remittances, income proof and a few other documents to process the top-up loan. Then the bank will decide on the quantum of an amount to be given, based on his income, total housing loan already availed and the market value of the mortgaged property.
Low-interest rate
Usually, the interest rates on these top-up loans are low and similar to the interest rates of home loans. Hence, it can be marked as a low-interest rate option among available choices. These days some banks and lending institutions are doling out top-up loans. Instead of borrowing at high-interest rates, a top-up loan could be preferred when quick money is needed.
