What is a top-up loan? When and how can I avail it? — Anitha Mehra

A top-up loan allows you to avail a loan on top of your home loan. The usual tenure is about 10 years and is offered after a few years into the home loan disbursal, as this gives a fair idea about your repayment track record.

This also increases your loan eligibility.

The logic is that you have started repaying your loan and your outstanding has begun decreasing with each payment. A top-up just enables you to use that margin towards obtaining a loan that you may urgently require.

It is almost a personal loan, except that it comes with lower interest rates, though not as low as home loan rates, based on the prevailing rack rates. You can use this loan for any purpose. A top-up loan on your home loan is an ideal choice to pay for your parking space or to fund your son’s higher education.

Pledge property to fund business

I have ancestral properties in Hyderabad and in Goa. Can I use them to get funds for a business plan? — Das Kurien

Sure you can! You could generate a lot of funds pledging your properties for a loan. To be on the safer side, see if you can include one of the properties in your business plan in terms of, say, workplace use. Else, consider renting it out to other businesses. These locations are high on tourism value. See if you can rent out one of them to a resort or spa business chain and use the rent as a regular source of funding for your business.

For the second property, you could obtain a loan against property. The loan amount depends on the value of the property. This can range anywhere between Rs 1 lakh and Rs 3 crore. Another good thing about this loan is that you can get a longer loan tenure, as long as 20 years.

Though it means you will pay interest for a longer period, these loans come with lower interest rates compared with other loans. The only downside is the risk of giving up your property if you are unable to repay the amount in full.

Adhil Shetty, CEO, BankBazaar.com, will respond to questions on home loans. E-mail questions to blproperty@thehindu.co.in .

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