In times of monetary need, a personal loan can reduce stress and has several advantages. You have two choices if you have already found one and are suddenly faced with a huge expense demand, such as a marriage: a top-up loan or a new personal loan.
Existing lenders provide top-up personal loans to current borrowers of personal loans so they can access extra loan amounts over and beyond their ongoing personal loan balance. This loan amount is frequently made available to a select group of current borrowers of personal loans who have a solid track record of making their payments on time and have successfully made a certain number of EMIs. A top-up personal loan can be used for a variety of personal objectives much like a personal loan. This includes paying for home renovations, vacations, weddings, and other personal expenses. Continue reading for information on its features, interest rates, requirements, and benefits.
When should you take a top-up loan?
You are qualified for a top-up loan if,
- In order to fulfill your financial obligations, you urgently need money.
- The applicant require money right away for things like business growth, travel, wedding costs, etc.
- He/she choose to employ low-interest loans with a long term.
- You have already made a set amount of EMI payments on an existing personal loan.
- You want a loan that requires little to no paperwork.
Points to consider while taking top-up personal loans
You should always make a logical choice when taking out any type of loan. This can be done by evaluating your current status and future financial prospects. To help you with your decision-making, we have listed a few important factors. It may be used to compare a top-up loan versus a new personal loan.
Interest rate
Top-up loans have interest rates that are similar to personal loan interest rates. The offer should be taken advantage of if it is lower than what is available on the open market. Otherwise, you must bargain with the current lender to reduce the rate to the desired rate. If it doesn’t work out, you can choose a new personal loan to lower your EMI payments each month. The interest rate should be at least 2%–4% less than the current rate if you want to fully benefit. This will reduce the amount of interest and EMI you owe.
Tenure
Top-up loans are good for as long as the current personal loan is in good standing. The entire loan (top-up plus existing personal loan) will therefore last for another three years if you decide to take out a top-up loan two years after the previous personal loan’s five-year term began. This could result in a further increase in your EMI requirement and more adjustments to your regular financial routine.
Naturally, the income will need to be higher from the time you first sourced the loan. Make sure that all the spending are under control in order to fulfill the commitment of an increased EMI. It makes sense to opt for a new personal loan with affordable rates and a longer loan term rather than a top-up loan if you haven’t seen an increase in your salary over the past two years.
Features of top-up personal loan
- Available only on an existing personal loan
- No collateral is required: Most lenders do not require security or collateral from borrowers. Additionally, they might not need a guarantor.
- Attractive interest rate: Top-up loans are often provided by banks and other financial organizations at the same interest rate as the initial loan that was authorized. Numerous top-up personal loans will be offered, each with a different interest rate depending on the applicant’s credit history.
- Loan amount: Various lenders offer different maximum loan amounts under the top-up loan category. However, after accounting for the amount of the borrower’s outstanding personal loan, the total amount of top-up loans would not exceed the total loan amount for which the borrower was eligible.
- Flexible repayment tenure: You can get a loan top-up for a term that is between 12 and 60 months long as long as it doesn’t go beyond the outstanding term of your current personal loan.
- Offered on balance transfer as well
- A few financial institutions now provide top-up personal loans for balance transfers. These options are appropriate for borrowers who cannot or are paying higher interest rates for top-up personal loans from their current lenders.
- Flexible end use: Similar to a personal loan, you can get a top-up on your outstanding loan to pay for certain personal expenses.
- Quick processing and disbursal: In contrast to applying for a new loan, borrowers who have already received a personal loan from the lender and have already been subjected to checks can be accepted for a top-up loan much more quickly.
