Difference between a Top-Up Home Loan and Loan Against Property
Traveling abroad for work on short notice, paying for unplanned medical procedures or a destination wedding requires you to have strong finances. Even if you don’t have the amount saved up, you don’t need to worry as lenders offer a loan to help you out, be it a personal loan or a top-up loan. That said, since a personal loan is free of collateral and has a higher interest rate, you can consider opting for a loan against property or a top-up loan on an existing home loan.
But should you add to your current home loan or should you choose a loan against property? Read on to know the differences between the two to make a wise choice.
Understanding a Loan Against Property
A mortgage loan is obtained by offering your lender a residential or commercial property you own as collateral. Available at both banks and NBFCs, it is also known as a loan against property. This loan helps you avail a large loan amount at a nominal loan against property interest rates. Also, since the loan is secured, lenders aren’t as worried about you defaulting on repayment and offer lengthy tenors instead.
Understanding a Top-Up Loan
A top-up loan basically works as an extension on your existing home loan. Home loans are offered by banks and NBFCs for the purpose of buying a new house, property or for construction, repair, and renovation. In the case of a home loan, the house you are purchasing serves as the collateral. Once you have made a certain number of home loan EMI payments, your lender will allow you to borrow an additional ‘top-up’ amount on your home loan.
Exploring the differences
- On the basis of collateral:
In case of a loan against property, the collateral can be any residential or commercial property that you own. For a top-up loan, the home loan collateral serves doubles up as security and no additional collateral is required.
- On the basis of the loan amount:
Typically, lenders offer mortgage loans running up to roughly 60% of the market value of your pledged property, thus offering you a substantial sum. For instance, the Bajaj Finserv Loan Against Property gives you financial assistance of up to Rs.3.5 crore. Top-up loans differ from one lender to the next and range from lakhs to crores.
- On the basis of interest rate:
Both loans offer economical interest rates, largely because they are backed by high-value security.
- On the basis of disbursal time:
Once again both loans have speedy disbursal, but this also depends on the lender you approach. As an existing customer, typically top-up loans are quick to get as they involve minimal documentation and processing time since you don’t have to apply from scratch. Similarly, a loan against property also requires minimal documentation and can be processed within 72 hours when you apply with top lenders like Bajaj Finserv.
- On the basis of loan tenor
Top-up loans and mortgage loans, both being secured, have lengthy tenors. Tenors range from 2 to 20 years and beyond.
On viewing the differences, if a loan against property is what ticks the boxes for you, then avail of an impressive one like the Bajaj Finserv Loan Against Property.Taking this loan gives you an amount of up to Rs.3.5 crore at your disposal. Mortgage loan interest rates here are affordable and you can opt for a fixed or a floating interest rate scheme. Repayment stretches up to 20 years, making it easy for you to pay an EMI that doesn’t put your finances under undue stress. You can compute your EMI effectively by using the Bajaj Finserv Loan Against Property EMI calculator and benefit from nominal to zero prepayment and foreclosure charges too.To sign-up quickly, check your pre-approved loan offer. Simple online verification will give you instant approval and access to a range of customised financial solutions.