After Devender Sood bought a flat in Noida three years ago, he barely had any money left to do the interiors. The Rs 32-lakh flat had gobbled up a Rs 20-lakh home loan and some more. But now things are better. Earlier this year, Sood took a top-up loan to get his home in order. Cost of renovating house: Rs 2 lakh. EMI for 10 years: Rs 2,533. Appreciation by wife and family: Priceless.
A top-up loan is something like an extra helping. It can be taken in addition to any existing big-value loan. The new loan will be linked to the older loan but at the prevailing rate of interest.
However, a top-up home loan cannot be used for anything other than construction and renovation of the house. HDFC, for instance, insists on a work estimate from a certified architect before clearing the loan. Before disbursement, there is an inspection of the property to see the extent of the work. Of course, not all lenders are as finicky—or as prudent. Some banks dole out top-up home loans without caring to check how the money will be used.
There are no such conditions on usage of funds in case of top-up personal and car loans. The borrower is free to spend the money as he feels fit. So what are you waiting for?
—with inputs from SUDHIR GORE