Top Up Loan aka Enhancement Loan


February 21, 2013BankingNo comments

Top Up Loan / Enhancement Loan

A Top up loan or Enhancement loan basically allows you to avail a loan on your existing Home loan/LAP. We can easily avail top up/enhancement loan as repayment of your existing loan is already in place and your principal amount also starts decreasing.

This gives a fair idea about your repayment track record, which means there are no defaults down the line and this also increases your loan creditability. A top up enables you to utilize the time gap towards obtaining a loan in case you urgently require funds to meet some of your needs.

Loan Tenure

The maximum loan tenure of Top up loan can be 15 years or remaining loan tenure of your existing loan (whichever is lower). Top up/ Enhancement loans can be availed after 6 months of the disbursement of the existing home loan/LAP or upon possession/completion of the existing financed property (In case of Home Loan).

End use of top up loan

This loan can be utilized for any purpose. A top loan on your existing Home loan/LAP is an ideal choice to pay for your parking space, fund your son’s higher education, Business expansion etc.


You can take a top up loan when you have a home loan to top up on. The conditions for top up loans vary from bank to bank. You just need to have faultless repayment track record.

You can approach the same bank in which you took your home loan but if your bank does not offer you the option, as some reserve the right to provide a top up, then you could Balance Transfer the home loan to a bank that is willing to give you a good deal on the top up loan.

The outstanding loan amount balance with the bank, the market value of the property and your ability to repay a top up, are all taken into account to figure out how much top up the bank gives you.

It is always ensured that the outstanding loan amount you owe the bank plus the top up loan does not increase beyond around 70% of the market value of the property.

Interest rate charged on top up loan

If you are looking to repair and renovate the house then the rate might be at Home Loan rates. And for other purposes bank might charge you LAP rates.

Repayment Capacity

Banks/ Financial Institutions will check the credit score (CIBIL) and the individual’s income to justify the repayment capacity.

Top-up vs. personal loans

As compared to the personal loans, the procedure is simpler and quicker since you are an existing customer.

The tenure of top-up/ enhancement loans is up to 15 years, wherein which remains up to 1-2 years in case of personal loans.

Top-up/ Enhancement loans carries low interest rate around 11.00% – 13.50%. Also EMI is lesser than the personal loan due to tenure and ROI. You are also eligible for higher loan amount due to Less EMI and high tenure.

Tax benefits

Tax rebate for this loan depends on what purpose you are using the loan. All loans liable for a rebate will be offered tax exemptions as this will be treated like any other loan. For example if the top up loan has been used to purchase some more property then the principal amount of the top up and the interest that was repaid will be liable for a rebate.

Are Top up loans worthwhile?

Top-up loans are very worthwhile for homeowners who want to borrow a large amount at a low price without having to re-mortgage. They are especially good for home improvements, as you can make back the cost of the loan by adding to your property value.

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