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Personal Loans vs Top-up Loans: How to choose the right product for your needs

difference between top up loan vs personal loan

For funding important events and needs in life, a personal loan often comes to the rescue. And when the demand for funds increase mid-tenure, one can take another personal loan or a top-up loan. They can help meet expenses the original loan couldn’t cover.

What differentiates personal loans and top-up loans from each other? Let’s understand via the following eight features:

Interest rates

Top-up loans have low interest rates as compared to personal loans.

Type of product

Personal loans are unsecured loans which can be availed from any bank or NBFC.

A top-up loan is a secured loan which can be availed from your loan provider.          

Tax benefits

A personal loan would most likely not get you any tax benefits on it.

Once a top-up loan is disbursed, and the funds are used for pre-defined reasons like home renovations or house expansions, you can avail tax benefits up to a certain amount.

Lending source 

A personal loan can be availed at any time from any financial institution.

A top-up loan can only be availed on an existing loan from the lender.

Ease of availability

For personal loans, there will be certain eligibility criteria and documentation requirements, which would be subject to the lender’s rules. Having a bank account with a good credit score is essential to avail one.

A top-up loan can be easily availed from the same lender who would have granted you your original loan. To avail the top-up loan, you must have paid the EMIs at regular intervals and never been on the defaulters list.


Top-up loans have flexible tenures. A longer tenure is allowed on these loans when compared to personal loans. Most of the time, the remaining tenure on an existing loan is set up as the top-up loan tenure.

Processing time

When you apply for a personal loan, it takes a while for the application to get processed. This is because the bank must verify the documents, check your profile, and process the details.

For top-up loans, the bank already has your documents and would have verified your details. This reduces the processing time. Most times, the loan can be applied for online via net banking, with the amount getting disbursed in a few hours.

Loan Amount   

Usually, personal loans up to Rs. 40 lakhs are offered by lenders.               

A top-up loan amount of up to 30% of the existing disbursed loan can be availed.

Which loan offering should one choose?

  • A top-up loan should be your preferred choice if you’re planning to simply cover the additional expenses that can’t be taken care of with the original loan. Since the top-up loan will have to be availed from the same lender, you won’t have to worry about the entire documentation process again. One also gets to benefit from the lower rate of interest.
  • If you need a greater amount of funds and are comfortable repaying it over the long term, you can go ahead and take a personal loan. Just keep in mind to check the impact on your credit score upon availing the loan.

To know more about loans and avail the benefit of some expert advice, visit our website, and choose the right product for your personal finance needs.



The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.