Any loan demands sound financial management. The majority of banks, housing finance companies, and non-banking financing organizations offer a variety of loans to satisfy the diverse demands of consumers. If you ever need more money, you can also acquire a top-up loan on an existing house when you get a home loan. Another option for borrowing money is a personal loan. Before selecting between the two loan types, though, there are a few points to keep in mind.
What is a personal loan?
Personal finance solutions are among the most well-liked lending options. This can be applied to a variety of goals. With an unsecured loan, you can obtain a flat sum of cash without putting up any security. You are not obligated to provide an explanation for why you are borrowing the money and can use it to meet any immediate financial necessity.
What is a home loan top-up?
A home loan top-up is a loan that you can obtain in addition to your present mortgage in order to pay off any debt. Thus, it might act as your security net at crucial moments. However, the interest rate for the top-up facility is a little higher.
Comparing personal loans and add-on mortgages is done here. Which is preferable, a personal loan or an additional mortgage loan?
Home Loan interest rate
As was already indicated, you can obtain a top-up loan for your current mortgage. Without a doubt, the lower interest rate of this sort of loan is its main benefit.
It’s because the lender doesn’t request additional security from you but instead uses your home as collateral. In contrast, you are not required to offer security for a personal loan because it is an unsecured loan. Lenders may impose a higher interest rate on personal mortgages. High equated monthly installments, or EMI, is another effect.
A top-up home loan and a personal loan comparison that ignores loan tenure is insufficient. Loan terms for mortgages are typically 20 years or longer.
If you take out a top-up loan, you can prolong the loan’s term. However, your EMI payment may also change. Personal loans have a maximum loan term of 7 to 15 years, and they must be returned within that time frame. As a result, before taking out any loan, the loan tenure must be taken into account.
Early payment fees
When comparing personal loans and mortgages, we must consider the penalties that come with them. The Reserve Bank of India ordered that borrowers who pay back top-up housing loans be not penalized in any way. On the other hand, if you want to pay off your credit before the predetermined time period, the lender retains the ability to charge you a pre-payment penalty.
If you have been on time with your home loan payments, you should have no trouble getting this top-up loan within 24-48 hours.
It would be fantastic if you considered additional factors in addition to those mentioned above, such as the EMI amount and tax benefits.