5 advantages of benefiting from an additional mortgage in the event of financial difficulties

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Here are 5 major benefits of getting a home loan add-on over alternative options such as a personal loan, credit card loan, and car loan.

Just like other consumers, borrowers of existing home loans may also need to take advantage of additional credit facilities to finance major expenses such as home improvements or renovations, buying a car, higher education children, etc., or to meet financial demands. Sensing this need, home lenders have started offering add-on home loans to existing borrowers without any end-use restrictions.

Here are 5 major benefits of getting a home loan add-on over alternative options such as a personal loan, credit card loan, and car loan, among others:

Lower interest rate

Personal loan interest rates typically range around 10% to 24% per annum depending on the borrowers credit profile and other criteria. The interest rate on a credit card loan is usually a notch higher than personal loans offered to a borrower from the same lender. However, in the case of an additional mortgage, the interest rate is generally the same or a notch higher than the interest rate of the underlying mortgage. This makes add-on home loans one of the cheapest credit options for existing borrowers who service home loans at lower interest rates.

No restrictions on end use of funds

Although add-on home loans can only be used by existing borrowers, they come with no end-use restrictions except for speculative purposes. The lack of end-use restrictions makes add-on home loans a great alternative to personal loans or credit card loans for existing borrowers.

Longer repayment term

The term of the top-up home loans depends primarily on the remaining term of the underlying home loans, with some lenders additionally capping the term of the top-up home loans at 15 years. Repayment terms for alternative credit options like credit card loan and personal loan are generally up to 5 years, with some lenders offering personal loans with longer terms of up to 7 years. Since longer tenure leads to lower EMIs, opting for a supplemental home loan can help reduce the burden of EMIs. Similarly, existing home borrowers who are looking for longer loan terms to finance their car purchase may also consider additional home loans.

Higher loan amount

In the case of complementary home loans, the amount of the eligible loan sanctioned by the lenders generally corresponds to the difference between the amount of the home loan initially sanctioned and the amount of the loan remaining due. As for the personal loan, the loan amount can vary between Rs 50,000 and Rs 40 lakh depending on the income and repayment capacity of the borrower. The loan amount in the case of a credit card loan is usually proportional to the credit card holder’s credit limit. However, some card issuers tend to offer credit card loans beyond the cardholder’s credit limit.

Therefore, the chances of getting a higher loan amount are much higher in the case of an add-on home loan, especially for those who have already repaid a significant proportion of the original home loan amount and who have a history of repayment. disciplined.

Fast processing and documentation

Lenders typically take 1-2 weeks to disburse add-on home loans. Credit card loans are usually disbursed instantly or within hours of loan application submission, while personal loans are disbursed within 2-7 days. Some lenders also claim to offer pre-approved personal loans with faster disbursements. Therefore, personal loans or credit card loans would suit those looking for faster loan disbursements.

However, some lenders have started offering pre-approved instant home loans wherein they claim to disburse the loan amount on the same day of loan application. So, those who have existing home loans with lenders offering instant add-on home loans can consider add-on home loans for quick funding.

(By Ratan Chaudhary, Head of Home Loans, Paisabazaar.com)

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