Which One is Better – Balance Transfer or Top-Up Loan?

The Indian home loan sector is striving with the Central Government initiating various schemes to provide affordable homes to its citizens. Financial institutions across the country have also simplified the process to avail credits to fund the required expenses.

There is a wide range of benefits associated with such credits. Home loan top up and balance transfer are just two of the host of benefits associated with a housing loan.

What is a home loan balance transfer?


A housing loan balance transfer is a process of shifting an existing home loan to a new lender to reduce the associated costs with such credits. While the new lender pays the outstanding amount to the current lender, borrowers have to continue paying the remaining debt to a new lender with the revised terms.

Benefits of Home Loan Balance Transfer


  • It reduces the burden of EMIs

Borrowers can avail a home loan transfer facility when a new lender offers a lower interest rate that their current rate. It significantly reduces the total cost associated with the loan and subsequently, the EMI amount.


  • It provides lower associated costs

Along with interest rates, there are a few other costs associated with an advance that can significantly increase the debt of a borrower. Charges like statement fees and EMI bounce penalties, add to the cost. Also, some financial institutions charge penalty fees for availing part-prepayment and foreclosure facilities.

Borrowers can choose a home loan balance transfer to reduce such charges associated with a loan.


  • It offers better repayment terms

Borrowers can opt for housing loan transfer if a new lender provides better repayment terms. It can significantly reduce the financial burden on an individual.

Also, the Flexi Loan facility entitles a borrower to withdraw the disbursed amount in parts. They can withdraw the required funds whenever they need it. Interest is charged on only the utilized amount rather than the total disbursed amount.


What is home loan top-up?

A top-up loan is an additional credit over an existing home loan that one can avail post-balance transfer. Usually, it comes with no end-usage restrictions and can be used to fund any required expenses, including home renovation, arranging marriage, pursuing higher education, etc.


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Benefits of a top-up loan


  • Low-interest rate

The top-up loan interest rate is much lower compared to other unsecured credits. Financial institutions usually charge the same interest rate in case of these types of credits as home loans. Borrowers can considerably reduce their EMI amount by availing such credits as other total associated costs will be much higher if they avail other financial products.

  • Quick loan disbursal

Top-up loans are offered on an existing home loan, so they do not require another application process for that. It reduces the time taken to approve such credits. Also, lenders do not conduct the verification on a top-up loan as it is already done while authorizing the existing credit.

The reduction in time can be crucial during emergencies. Furthermore, borrowers can use a top-up loan calculator to know the amount they are entitled to avail beforehand to speed up the application process.

  • It comes with a long tenure

The tenure in the case of a top-up loan is the same as of a home loan. Some financial institutions can offer tenure ranging up to 20 years. Hence, borrowers can benefit from a top-up loan as it reduces the amount of monthly installment significantly.

Home loan top up and balance transfer are two facilities that can benefit a borrower massively. They must develop a proper financial strategy to make the most of these facilities.


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