These top up loans are given for the people who are having proper credit record. Prominence and importance is given for the people who paid the loan without any balances and defaults. Most of the banks are not sanctioning the loans only if the old debt is repaid for at least six to nine months without any defaults in between.
Top up loan amount
For this process, each bank will follow different methods. In the same way, these methods are changed based on the loan type that is taken. There is a principle for the housing loan where the balance that is to be paid for the old loan and the total amount which is taken at present in the form of top up loan should not exceed more than 70% of the total value of the loan including the existed and the new loan.
If one has taken the loan for 12% of interest rate for an amount of 30 laks for a tenure of 20 years. It completed three years of the loan which is taken in the past for that interest rate. Then, the value of the house which is constructed in the past has increased to Rs. 20 laks and reached to Rs. 50 laks. Based on this total value, the banks will not give more than 705 of the total value of the house where the loan that is sanctioned will be only Rs. 35 laks; where only 70% is sanctioned on the total value of the house in the present interest rate that is existed. But, the customer has cleared Rs. 31 laks as principal amount in these three years.
This means, the balance which the person has to pay for the bank is Rs. 28.7 laks. In this calculation the balance which is considered by the bank for sanctioning the loan which is Rs. 35 laks and subtracting the amount that is to be paid to the bank which is Rs. 28.7 laks and the remaining amount which is Rs. 6.3 laks can be taken as top up loan by the customer. This is the maximum amount that will be offered by the bank. Even less than this amount is also given by the banks but the amount will not exceed more than the maximum amount.
In case of car and personal loans
In case of the vehicle and personal loan, the total top up loan that is sanctioned by the bank is known depending on the total amount that is balance and the capacity of the payment that is done by the customer. Here, the issues like value of the vehicle are not taken into consideration.
There will be tax benefits for the EMI’s which are paid for the house loans. These are applicable along with the paid interest for the loan that is taken. The tax benefits are based on the total loan amount which is taken in case of top up loans. If the housing loan that is taken for the repairing of the house and for the construction of the house, the tax benefits are even applicable on the top ups too.