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:
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.
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.
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.
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.
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?
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.