In today’s time, you may have to cover multiple financial needs and to do that; lenders make multiple loans available. Some funding options may come with a higher rate of interest which may strain your budget for a long time.
As a result, it is smarter to opt for a top-up loan if you are going for a home loan transfer. A top up loan comes with a longer tenor and a lower rate of interest to help you cover your needs without issues.
In the context of our discussion, let’s get to know some information about the top-up loan including the tax benefits that you can claim on it. Read on!
What Is a Top-Up Loan?
When you have a home loan account and transferring it from one lender to another to enjoy a lower interest rate, it is called the process of home loan transfer.
When you opt for a home loan transfer, the new lender offers you with the facility of a top-up loan which may be up to Rs.1.5 crore to fund other needs in life.
The biggest benefit of applying for the top-up loan is that it comes with a lower rate of interest and a long tenor.
As a result, you can cover other expenses in life without paying higher interest costs and paying smaller EMIs.
If you have managed to repay earlier loan EMIs and credit card outstanding, then you can get the approval for the top-up loan without hindrances.
Quick Information About Top-up Loan Tax Benefits
Like home loans, availing a top-up loan can also help you in claiming tax benefits. The tax claims that you can enjoy on a top-up loan includes a deduction of up to Rs.1.5 lakh on the repayment for the principal under Section 80C of the Income Tax Act. Nonetheless, the tax advantages will be overturned if the property gets sold within 5 years.
The next benefit is a deduction of up to Rs.2 lakh on the interest paid in accordance with Section 24 of the Income Tax Act in a fiscal year. You can claim the maximum of Rs.2 lakh only when your property is self-occupied and gets completed within 5 years. If this criterion does not get fulfilled, then the claimed limit instantly reduces to Rs.30,000.
As a result, availing a top-up loan not only may help you cover many needs easily but even help you lessen its burden by enjoying the discussed income tax benefits on the home loan.
Therefore, if you are planning to opt for a home loan transfer in the future, then going ahead with a top-up loan to save some taxes to reduce the burden is a welcome step.
Top-up Loan Eligibility Criteria
The top-up loan interest rate is quite affordable, and hence, people apply for it. You need to fulfil some eligibility criteria such as:
- You should be an Indian citizen
- Your age needs to be under 23-62 years
- You need to be a salaried individual with a work experience of 3 years and beyond
Also, to know how much top-up loan you can grab, you can also use the top-up loan calculator and then apply for it to avoid rejections. A top-up loan calculator is available free of cost at a lender’s website which you can use and know an eligible figure upfront.