A home loan is a long term commitment wherein a large chunk of your monthly income goes into the monthly instalment. And with that happening, one certainly isn’t left with many funds in hand to care for any other financial emergency. Moreover, with a running loan, you may not get another loan or credit from the lenders. Then what options are left? Fret not, as home loans balance transfer and top up are two potential financing options which you can avail if need be. These two options are different in their approach and hence it is imperative to understand them thoroughly before opting for one to make a wise decision.
WHAT IS HOME LOAN BALANCE TRANSFER?
A home loan balance transfer is the process of transferring your present home loan from the current lender to a new lender who is offering a lower rate of interest on home loans in lieu of saving some funds which would otherwise have gone as interest. Herein, the new lender repays and settles the ongoing home loan with the current lender by directly paying to him. The loan amount will not be deposited in your account. A home loan balance transfer can be of great help in reducing your EMI amount. It is, however, important to compare different lenders before choosing on the new lender and carefully do the calculations in respect of processing charges, foreclosure charges so that your shift doesn’t end you up in paying more. LoansJagat offers an excellent platform for comparing different lenders and applying for a loan through their online portal.
WHAT IS HOME LOAN TOP UP?
Existing home loan holders can avail home loan top up credit facility wherein they can avail more funds as a top-up. The extra loan is offered against the extended mortgage against the collateral. The top-up facility varies from lender to lender and hence it is crucial to get in touch with your bank to avail it. Under a home loan top up, the money comes directly into your account and you can use it as per your discretion for meeting out the financial emergency as per your will.
It is, however, important to note that both the home loan balance transfer and the home loan top up are possible only if you are disciplined with your repayments.
WHICH OPTION IS BEST SUITABLE?
Both options have their pros and cons. On account of your needs and requirements, you can avail one. Here are some pointers which you shall consider to make a well-informed decision.
- Check for suitability: While home loan balance transfer helps you in saving some money in respect to the interest and EMI, home loan top-up gives you funds in hand which you can use as per your requirements. While home loan balance transfer lowers your monthly instalments, in top up your monthly EMI and interest increases.
- Check for availability: Home loan balance transfer can be availed after a year of home loan disbursal provided you have been regular with your EMIs. A home loan top-up can be availed after a few years when you have repaid a chunk of the home loan amount.
- Amount: In a home loan balance transfer, no funds will be sent to your account and the new lender will repay the whole loan amount directly with the current lender. Whereas in a top-up facility, the extra funds will come in your account and you can use as per your needs.
- Lender: Home loan balance transfer can be availed if you switch from one lender to another whereas top-up facility can be availed with your current lender and also with a new lender offering facility of home loan balance transfer and top up.
- EMI: If you opt for a home loan balance transfer, your monthly instalments will reduce considerably which will eventually lower your financial burden. However, if you opt for a home loan top-up, then your monthly instalment along with the outgoing interest increases. Usually, there are separate EMIs for a home loan and home top-up.
Thus, it is important for you to consider all the above-stated factors before opting for the credit facilities associated with home loans. If you need funds in hand for meeting out on a financial emergency, then top up is a better option. And if you wish to lower the financial burden off the home loan then home loan balance transfer is the ultimate choice.