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Personal Loan

Top-up loan or a new personal loan: Which should you choose?

29 May 2025 by Team FinFIRST

Top-up Loan vs Fresh Loan

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When a borrower needs funds in an emergency while having an active loan already, they may consider a top-up loan on the existing personal loan or a new personal loan. Both are beneficial in their own ways, and the best decision would be based on the loan terms, interest rate, and repayment capacity. Let’s explore both these options and find out which one is suitable for you.

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The Essential Role of Personal Loans in Financial Planning

Managing your finances with an ongoing Personal Loan

What is a top-up loan?

A personal loan top-up loan is a facility in which the borrowers are provided with funds over and above the current personal loan. Financial institutions typically offer it if the borrower has a good payment history. Here is what happens when a borrower opts for a top-up personal loan:

The payment record of the borrower will be checked by the lender prior to the top-up loan being extended.
The additional amount is taken as an addition to the current loan.
Since it's linked to an existing loan, it often carries a similar or lower interest rate.
The repayment tenure may be stretched out, or the repayment cycle may be adjusted appropriately.

Advantages of top-up vs new personal loans

Top-up loans offer convenience to borrowers looking for additional funds to meet their extra expenses. However, there are several other reasons why top-up loans are a common preference, such as:

A fresh application may lead to higher interest rates due to an already running loan. A top-up loan, on the other hand, helps borrowers get the same interest rate as the existing loan.
A top-up loan usually requires lesser documentation since the borrower already has an existing loan with the lender. While in the case of a fresh loan, the applicant needs to begin the process from scratch, extending the documentation and approval process.
Faster processing and quick disbursal since the lender already has the borrower’s details.

Drawbacks of a top-up loan

Despite several advantages, a top-up loan comes with a few drawbacks like:

Only existing borrowers with a good repayment history can avail top-up loans, restricting new applicants.
Adding a top-up loan increases the total outstanding amount, leading to higher EMIs or an extended repayment period.

What is a fresh personal loan?

A new personal loan is a standalone loan, not linked with any existing account. It entails a new application, processing, and evaluation by the lender.

The borrower submits a new application, and the lender assesses their income, credit score, and finances.
The borrower is sanctioned a lump sum along with fresh repayment terms and dates.

Benefits of a new personal loan

Here are certain benefits of opting for a fresh personal loan:

Higher loan amounts depend on eligibility in contrast to the present loan amount.
Increased freedom of choice for lender, tenure, and rate of interest.
Separate repayment schedule independent of other loans.

Drawbacks of a new personal loan

Fresh personal loans might come with certain drawbacks:

Increased documentation like proof of income and KYC details.
Interest rates will be slightly higher than in the case of a top-up loan.
Managing multiple EMIs can strain your monthly budget and complicate repayment.

Top-up loan vs. new personal loan: Which loan should you choose?

If you are struggling to decide which type of loan to go for, here’s a quick comparison to help you decide.

Criteria	Top-up loan	New personal loan
Loan amount	Limited to the existing loan	Higher, based on eligibility
Interest rate	Lower, as you are an existing borrower	Varies based on credit score
Processing time	Quick, minimal documentation	Standard approval time
Repayment structure	Linked to the original loan	Independent loan tenure
Eligibility	Only available to existing borrowers	Open to all eligible applicants

Compare your needs, weigh the advantages and disadvantages and opt for a loan according to your repayment ability.

Why choose FIRSTmoney for your loan requirements?

FIRSTmoney personal loans from IDFC FIRST Bank combine flexibility, fast disbursal, and low interest rates and the facility to avail multiple on demand loans around the clock.:

Zero foreclosure fees, enabling borrowers to close their loans any time without additional fee.
Loan amount of up to ₹10 lakhs for every financial need.
Greater flexibility in getting additional funds to meet urgent financial needs with just a few clicks.
Interest rates on personal loan starts at just 9.99% p.a., making it affordable.
Tenure is flexible, ranging from 9 to 60 months.
Quick and easy approval with minimal paperwork as it is a 100% digital loan.

Conclusion

If you need a higher amount or greater repayment flexibility, a new personal loan would be the best option.

If you already have an existing personal loan and need additional funds, a top-up loan will be a convenient option given the reduced interest rates and faster processing. Apply now for a FIRSTmoney loan in minutes!

Note: Interest rates may vary based on credit profile and lender policies

Disclaimer

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.

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