Choosing between a home loan top-up and a step-up loan requires in-depth know-how about both types of loans. While the financial market is full of lucrative deals from financial institutes, leading non-banking financial companies also offer multiple repayment-friendly choices. Factors like interest rate, EMI, processing fees and hidden charges form the essential aspects to decide before choosing between top-up and a stepup loan.

Difference Between Top-Up and Step-Up Loan

Let’s look at what these loan facilities have to offer –

– Top up loan

A home loan top-up is an additional credit facility extended to those borrowers who already have existing home loans running. Top-up loans can be availed for a wide range of purposes such as:

• House renovation
• Funding your child’s higher education
• Bearing wedding expenses, etc.

This is how you can fulfill your urgent financial needs with a top-up loan. Usually, the Top-up loan interest rate is kept lucrative as compared to other forms of credit.

In case of Top-up loans, an additional credit amount is disbursed to the borrower based on his requirement after checking his:

• Track record of repayment of the existing home loan
• Loan to value (LTV) ratio
• Repayment capacity, etc.

This facility is treated as a separate loan agreement. The documentation required in the case of Top-up loans is kept minimal as the borrower is an existing customer of the lender.

– Step-Up Loan

A step-up loan allows borrowers to access credits with lower interest rates where the lender does not maintain its spread. Step-up loans are offered to low-income borrowers by lenders on a no-profit basis.

Such loans also offer low loan amounts in comparison to a loan top-up although borrowers often refer to them to meet the down payment required for residential property purchase.

You can opt for a Home Loan from NBFCs at the most attractive interest rates. Apart from availing a maximum loan amount of Rs. 5 Crore, you can enjoy flexible repayment tenures of up to 20 years other than Top-Up loan facilities as well. Besides, you get innovative and industry-first facilities like –

• Instant loan approval and fast disbursal of the sanctioned amount.
• When your repayment capacity increases, you can pre-pay the loan amount and foreclose it without any extra charges.
• You can apply for a home loan transfer and avail a top-up loan at a nominal rate of interest. This top-up loan facility can offer loan amounts as high as Rs. 50 Lakh without any additional documentation.

However, you must always use your lender’s top-up loan calculator to calculate your EMI amounts beforehand and fix your budget accordingly.

Both of these loan facilities have their share of benefits. While a step-up loan’s purpose is restricted to purchasing a property, there is no end-usage restriction in case of a home loan top-up. Furthermore, a step-up loan is only for first-time borrowers, while a top-up loan is limited to the existing borrowers.