Which is better among Top up Home Loan, Personal Loan and Business Loan?
By Anupama Deshpande | April 30, 2018

The bank or home loan finance company offers you to borrow an amount over and above your home loan amount, which is termed as top up home loan. Top up home loan amount offered by the bank or HFC is around 75% of the value of your property minus outstanding home loan amount. For example, if value of your property is Rs 30 lakhs and the outstanding home loan amount is Rs 10 lakhs then top up loan amount will be around a top up loan of Rs 12.5 lakhs. Total of outstanding home loan and top up home loan cannot exceed original home loan amount.

Personal loans are unsecured loans offered by banks without any collateral at comparatively higher interest rates. It can be used for meeting any important expense like a holiday trip abroad, household shifting, family marriage, payment of credit card bill, repayment of an existing loan, medical emergencies and likewise expenses.

A Business Loan is a loan which is specifically extended for business purposes. It may be obtained from a bank and can be either secured or unsecured. It is offered to help you run your business in a hassle free manner and also assists the growth of your business.

Interested to know Why you should not keep All Your Money in Banks Savings Account?

Top up loan is not only used for renovation of your home but it can also be used for any personal purpose or even for business purpose.

Personal loan can be used only for personal needs like holiday trip abroad, household shifting, marriage in the family, payment of credit card bill, repayment of an existing loan, etc. It cannot be used for renovating home or for business purpose.

Usage of Business loan is restricted only for business use either to set up a new business or expansion of existing business. It cannot be used for building a home or for some personal use.

Top up home loan is available at a very low interest rate as compared to personal loan or business loan. It is available in the range of 8.30% to 10%.

Personal loan is available at comparatively higher interest rate as compared to top up home loan or business loan. It is available in the range of 10.90% to 17%.

Business loan is available at higher interest rate as compared to top up home loan. It is available in the range of 9.60% to 18%.

Interested to know How to get a Business Loan from a Bank?

Top up home loan is available for upto 30 years or runs concurrently with that of your home loan. Top up home loan tenure cannot exceed the remaining term of your home loan.

Personal loan tenure ranges from 12 months to 60 months.

Business loan tenure ranges from 12 months to 10 years.

Also read ICICI Bank Step Up Home Loan - Product Details

After going through above data, it can easily be concluded that Top up home loan is better than personal loan and business loan as it is available at lowest interest rates and for higher tenure.

Further, there is no restriction on usage of top up loan amount. You can use it as per your needs. Thirdly, no additional mortgage or security is required to get top up home loan. Further, there are less processing charges in top up home loan as compared to personal loan and business loan. Top up loan is processed very quickly and no further documentation is required as it is offered to only those borrowers who have already availed home loan from same bank. Lastly, you will also be eligible for tax benefits under Section 24 (for interest payment) of Income Tax Act, if you use the loan proceeds for the purpose of expansion, alteration, repairs or renovation of your house.