Top-up Loans 2024: Advantages, Eligibility, and Complete Guidance for You to Look Into

Surprises abound in life, most often unforeseen financial challenges. Unexpected medical emergencies or house repairs can turn into major expenses, which is where a top-up loan comes in handy.

As the term implies, a top-up loan is an extra loan taken out on top of the existing housing or personal loan. By accepting the financial institution’s criteria, you can simply obtain a top-up loan if you are currently repaying the original loan and are regularly making your EMIs on time. Almost all financing institutions in India provide top-up loans with uncomplicated paperwork and a speedy application process.

What Does a Loan Top-Up Represent?

In simple terms, a top-up loan is an extra loan sum that you can apply for on your current loan. It should be either a home or a personal loan. Banks and other financial organizations offer this option.

For example, if you have a housing loan that you are presently repaying, However, if you require extra money for home renovations or any other reason, a top-up loan may be beneficial.

Let’s have a look at the scenario of a top-up loan. Assume you currently owe your lender Rs. 80 lakh for a housing loan. You are allowed a ten-year payback period. You’ve paid your monthly EMIs over time, and your credit score shows your diligence. 

Now, serious repairs to your house are required, estimated to cost Rs. 10 lakhs. A top-up loan of Rs. 10 lakh is now an option that you can pay back throughout the final 5 years of your initial loan term.

Why Should One Opt For a Top-up Loan?

Top-ups are an increasingly common option that allows recipients to add a specified sum of additional money to their current loan. Clients who can pay back the loan, have a good credit score and have an excellent record of interaction with the financial institution are qualified for the top-up facility. It is offered for several purposes, such as covering kids’ educational costs, buying furniture for the home, and other unforeseen crises. It is considered a personal loan.

In basic terms, this type of borrowing is added to an existing debt. Instead of applying for a fresh loan, some people may ask for a top-up loan—amounts added to their existing loan.

The disbursement of this financing proceeds swiftly. As soon as the required documentation is received, the funds get credited.

This results in changes to the interest rates, repayment terms, and top-up loan interest rates for both the original principal amount and the newly borrowed sum. When an individual repay the existing debt on time, his or her chances of qualifying for a top-up loan increase.

Advantages and Highlights Of  Top-Up Loans: 

  • Less Debt

A top-up loan offers the ability to combine all of your current loans. Thus, you can reduce the total cost of interest on different loans. This is among the key factors why so many Indians choose top-up loans. The responsibilities of making numerous loan payments at once may be lessened by taking out a top-up loan. You can opt for a top-up loan on your house or personal loan and utilize this to pay off other obligations.

  • Few Documents Are Needed

The majority of Indian banks only require basic paperwork for top-up lending. This is a fact because the banks already know about the clients’ credit histories. Take advantage of the top-up loan calculator to determine the precise amount you require. From here, you can estimate the amount of the monthly interest payments. This will clarify everything for you if you are unclear about the maximum amount you are eligible for.

  • Fast Approval

Compared to personal or house loans, the authorization process for a top-up loan is faster. Because the banks already recognize the people applying for it. Additionally, because the financial institution is aware of the applicant’s qualifications, the funds are disbursed more quickly. As a result, a top-up loan is an excellent solution to satisfy urgent needs and have quick access to money.

  • Rate of Interest

The interest rate represents one of the most crucial factors. Individuals check interest rates when applying for almost any type of loan. When compared to other unsecured loans, the majority of lenders in India provide appealing interest rates on top-up loans. This is another important factor in the decision-making process for many. Top-up loans enable borrowers to better manage their repayments. Applicants for top-up loans in India may select between a fixed and a fluctuating interest rate with certain lenders. 

  • No Demand for Security or Collateral

The majority of lenders don’t demand any collateral or security from applicants for top-up loans. They don’t need any guarantors either. This streamlines the borrowing process. Additionally, it also cuts down on the duration of time required to review the application and transfer funds. So, you don’t need to be concerned about losing any assets in the process of applying for a loan..

  • Extended Payback Period

The amount of money you ask for and the balance remaining are the primary factors used by banks. People choose this loan because the repayment term is much longer than that of a personal loan. You should be aware, however, that the top-up loan’s term cannot exceed the duration of your first loan. For your assistance, you can make use of the top-up loan EMI calculator.

  • Option for Balance Transfer

You may have the option of switching a housing loan or personal loan to a different lender. You can do so if the current one fails to provide you with a top-up loan. This will assist you in meeting the financial requirements as well as helping you obtain the additional loan.

  • Simple Online Procedure

The digital application method makes it simple and trouble-free to submit a request for a top-up loan.

  • The Overdraft Facility

Borrowers can frequently get overdraft facilities from certain lenders. As a result, they can only charge interest on the amount that applicants take out of a loan limit that has already been approved. Thus, debtors can take advantage of simple withdrawals and repay them whenever it suits them.

  • Open Process

The process of granting a top-up loan is open and free of additional fees. While applying for a top-up loan, you should be aware of all relevant fees.

An additional amount of money over your current loan is known as a top-up loan. You might simply apply for a top-up loan in place of obtaining a further loan. A top-up loan can be used for a variety of financial needs. These may include home renovations, unexpected medical expenses, children’s schooling, etc.

The Benefits and Drawbacks of Top-Up Loans

Any monetary choice should be carefully researched based on the advantages and disadvantages. Let’s explore the benefits and drawbacks of top-up loans in more depth.

Pros Cons
  1. The authorization and payout process for a top-up loan is accelerated because of your pre-existing connection with a financial institution.
  1. Top-up loans usually include less burdensome paperwork. The process will go more smoothly because the financing institution already has all of your personal information from the first loan.
  1. For the most part, you can obtain a top-up loan without providing any extra security or collateral. Your asset from the first loan serves as security for the loan provider already.
  1. The money obtained through a top-up loan is available for use in several ways. It can be used for anything—personal needs, corporate growth, or even an unexpected health emergency—without severe limitations.
  1. Interest rates for top-up house loans are often comparable to or slightly higher than those on the original loan. They are therefore a more cost-effective option.  Particularly when compared to alternative lending options, this becomes the fastest and foremost choice.
  1. A top-up loan’s repayment terms generally coincide with those of your first housing loan.
  1. The main drawback of top-up loans is their exclusive availability to current housing or personal loan clients. Additionally, applicants may not be eligible if they have a history of delinquent payments or defaults.
  1. The size of your top-up loan depends on how much is still owed on the original loan. The amount of the top-up loan does not change, even if the market value of the asset increases.
  1. Since getting a top-up loan is simple, even if you maintain a solid repayment history, there is a chance that you may take out too much. In future years, this might cause financial hardship if not handled appropriately.

Who Can Request a Loan Top-Up?

To satisfy your money-related demands, you may file for a top-up loan. But you need to have an active personal or house loan. You still need to verify the interest rates on top-up loans as well as your credit score. You are free to use the money to cover different costs. Because there are no usage restrictions. But to keep your credit score above 750, you have to make sure you pay back the loan installments on schedule. This will guarantee the financial institution that you are a credible borrower.

When Should You Decide Whether to Apply for a Top-Up Loan?

Top-up loans come in handy in the following circumstances:

  • If you currently hold a personal loan and require additional financing. You must have fulfilled a specific amount of interest-only payments on your current loan.
  • Your goal is to be able to meet your financial obligations without having to cope with additional administrative burdens.
  • When you have an immediate financial need for any cause. It may be professional or personal.
  • If anyone prefers to combine their financial obligations rather than manage many loans, top-up loans are also preferred.

Basic Eligibility Criteria for Top-Up Loans

  • CIBIL Score: A person with a strong credit score (750 or above) can negotiate the best rates with lenders and lessen the strain of repayment.
  • Earning: Whether on a salary or as a self-employed person, one needs to have a reliable source of income.
  • Repayment History: An easy loan acceptance process might be supported by a strong loan repayment history. To qualify, make sure you pay your EMIs on time for any outstanding loans. These may be personal or house loans.
  • Current Loan: To be eligible for a top-up loan, the applicant must have an existing loan at that time.

How Can You Arrange a Loan Top-Up?

  • If you’re looking for a top-up loan from your current lending institution, follow the steps listed below:
  • To find out if your current lender offers a top-up personal loan, get in touch with them.
  • If the bank that you now have does not offer a top-up, you have the option to move your balance to a different lender.
  • Once you have the details of a financial institution, complete the online application.
  • Upload the required paperwork.
  • You can expect the top-up funds in your banking account upon approval.

Can a Top-up Loan be Exempt from Taxes?

The kind of top-up loan and its intended use determine who is eligible for tax relief. If the top-up loan is only used for building, remodeling, or fixing up a residential property, you are eligible for tax benefits. Depending on the use and kind of property, the precise amount may change. On the other hand, if the additional loan sum is utilized for personal expenses, there will be no tax advantage.

Bottom Line

Top-up loans give existing customers a lot of relief if they exceed their budgeted amounts. Because of the higher cost of personal loans, a top-up loan may lessen the financial load. If you want to use end-use funds without any restrictions, this is an excellent alternative. Visit Refer Loan and apply right away if you’d like to choose a hassle-free housing loan or an immediate personal loan with affordable interest rates! 

A flexible and effective approach to handling unforeseen expenses is a top-up loan. This loan serves as an extension of your current one, giving you a desperately needed monetary boost.

At Refer Loan, we recognize the value of making sound choices and the complexities of money management. Our range of financial solutions is made to meet a variety of demands, so you’ll continually have access to help.

Our group of professionals assists you at every stage of the process. Visit Refer Loan’s portal to explore the world of customized financial offerings. Discover and pick out the ideal option right now!




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