Description

Top-up loan Details

Top-up loan means when a bank offers a specific amount on the completion of a certain period on the current loan. This is important to know that only a borrower from the same bank can apply for such a Top-up loan only after the completion of repayment tenure or a pre-defined time frame as per the bank’s terms and conditions. However, if the current bank rejects the top-up loan application, then the applicant can opt for Balance Transfer of Personal Loan on his current loan to another bank, and then he can apply for a Top-up loan there.

Why Do People Choose Top Up Loan?

Many reasons can persuade an applicant to choose for a Top-up a loan but some of the common reasons are listed below:

  • Debt Consolidation: Suppose a customer is having multiple loans simultaneously such as car loan, personal loan, credit card debt, etc., he can minimize his debt by taking the advantage of top up loan or merging several loans into one. Not just it helps a customer to consolidate debt easily but he can also improve his credit score conveniently. Those who are unaware of the effect of multiple loans, they must know that multiple loans can impact your credit score negatively.
  • Extending A Current Loan: Mostly lenders do not monitor the fund usage of the top up loan. This is the reason, people apply for a top up loan instead of applying for a Best Personal loan. The top up loan amount can be used for wedding, travel, home renovation, etc. 
  • Other Emergent Needs: Suppose you have a medical emergency that too on an urgent basis, then you can refer to a top up loan instead of applying a new one. This process saves time and with less documentation, you can have access to the funds.

What is the Benefit of Top up loan?

  • Meagre Loan Burden: A top up loan can be a good tool to reduce the loan burden. The customer can choose a top loan facility on their loan and home loan. By opting for a top loan, you can reduce the overall cost of the existing loans. Besides this, it also saves you from the hassle of applying for a new loan.
  • Less Documentation: Since most of the time banks offer a top up loan on an existing loan, they don’t ask for further documentation. In simple words, the lender knows about the credit behavior of the borrower. Hence, they give preference to the borrower who applies for top up loan. Besides this, the complete process for a top up loan tends to be a bit faster than the ordinary loan. 
  • Swift Processing: Because of the existing relationship between the bank and the lender, a top up loan application takes much lesser time than a personal loan. This is the reason, usually, borrowers get quick access to the funds which ultimately serve their purpose of availing a loan in an emergency.
  • Lucrative Interest Rate: When you compare the interest rates of the top up loan with any other unsecured loan, you will find, top up loans are offered at a Best interest rate. That’s why most of the borrowers prefer a top up loan instead of applying for a new loan. 
  • Collateral Free: Most of the banks offer collateral-free top up loan which means that a borrower need not provide any security to the lender at the time of availing a loan. Since the offering is made on the existing relationship, you also need not any guarantor or co-signor. These two factors reduce the time to process a fresh top up loan application. So, any applicant who is looking to apply for a personal loan must consider top up loans rather than choosing a new loan.
  • Merged EMIs: Most banks allow their customer to pay one EMI for their original loan and top up loan instead of paying multiple EMIs. This way the burden of paying separate EMIs on different dates can be averted by merging all EMIs into one and pay a unified instalment. Besides this, the risk of defaulting on any of the instalments can be taken care of conveniently.
  • Optimum Tenure: When you apply for a top up loan, the bank or the financial institution offers you an extended tenure to repay the total outstanding of the loan. However, it is important to know that the extended tenure can’t be longer than the original tenure.

Also Read: Top up loans vs. Home improvement loans: Which is better?

Best Banks for Personal Loan Top Up

HDFC Personal Loan Top Up

Bank name 

Interest rate 

Tenure

Min loan

Max. loan

HDFC Bank

10.75% - 21.45%

5 years

₹ 50,000

₹ 15,00,000

HDFC Personal Loan Top Up: Features and Benefits

  • Quick approval for the top up loan.
  • Attractive interest rates are offered on top up over existing personal loan.
  • No further documentation required.

ICICI Personal Loan Top Up

Bank name 

Interest rate 

Tenure

Min loan

Max. loan

ICICI Bank

10.99% - 18.49%

5 years

₹ 25,000

₹ 20,00,000

ICICI Personal Loan Top Up: Features and Benefits

  • Get top up loan benefit on the current personal loan
  • You can get instant fund for your need.
  • ICICI top loan offered at lucrative interest rates.

AXIS Bank Personal Loan Top Up

Bank name 

Interest rate 

Tenure

Min loan

Max. loan

Axis Bank

12.00% - 24.00%

5 years

₹ 50,000

₹ 30,00,000

Axis Personal Loan Top Up: Features and Benefits

  • Get faster approval and the maximum amount on top up of a personal loan.
  • No need to submit more documents to get instant funds.
  • It is better than taking a new personal loan.

BAJAJ FINSERV Personal Loan Top Up

Bank name 

Interest rate 

Tenure

Min loan

Max. loan

Bajaj Finserv

10.99% - 16.00%

5 years

NA

₹ 25,00,000

Bajaj Finserv Personal Loan Top Up: Features and Benefits

  • Faster approval available if you have a personal loan with Bajaj Finserv.
  • You can extend your personal loan by opting for a top up loan.
  • It offers lower interest rate on top up loans.

KOTAK Personal Loan Top Up

Bank name 

Interest rate 

Tenure

Min loan

Max. loan

Kotak Mahindra Bank

10.99% - 20.99%

5 years

₹ 50,000

₹ 20,00,000

Kotak Personal Loan Top Up: Features and Benefits

  • Swift approval on top up loan with instant fund transfer.
  • Hassle free documentation to avail top up facility.
  • You can opt for a top up loan instead of applying for a new loan.

Best Banks for Home Loan Top Up

Loan Type

Interest Rate 

Tenure

Mode of Application

HDFC Home Loan Top Up

8.00% - 8.95%

30 years

Online/ Offline

ICICI Home Loan Top Up

8.25% - 9.35%

30 years

Online/ Offline

AXIS BANK Home Loan Top Up

8.90% - 9.10%

30 years

Online/ Offline

SBI Home Loan Top Up

7.90% - 8.55%

30 years

Online/ Offline

Eligibility Criteria for A Top Up Loan

Every bank has a different set of eligibility terms for top up loans but the common thing between all the banks is given below:

  • The lender looks for a clean repayment history because a clean repayment history suggests that the borrower is responsible for handling his debt. Besides this, it also signals that lending again to the same borrower is less risky.
  • To enjoy the benefit of a top up loan the applicant must have an active loan either personal or home loan. If any candidate has an existing loan, he can apply for a top up loan.

Documents Required for Top Up Loan

However, the need for the requirement of a top up loan is minimal because the paperwork has already been for the same yet you may need to submit some documents which are listed below.

  • Identity proof such as passport, Aadhaar card, voter ID, PAN card, driving license, etc.
  • Income proof such as latest salary slips and bank statements
  • Address proof such as rent agreement, passport, utility bills, etc.
  • Passport-sized photographs

 

Top up loan vs Personal loan

 

 

Basis of Comparison

Top Up Loans

Personal Loans

Interest Rate

If you compare the interest rate of the top up loan, you’ll find that top up loans are cheaper.

As compared to top up loans, personal loans are costlier.

Loan Disbursal 

Top up loans are disbursed in a short period because top up loan application doesn’t need to go through with the same scrutiny.

When you apply for a personal loan, you need to fulfill a much-elaborated eligibility criterion which includes credit history, documents, and much more. In this way, it takes more time. 

Collateral

To get a top up loan, you need not provide any collateral.

To get a personal loan, you don’t need to provide any collateral but in case of a bad credit score, the lender may ask you to bring a guarantor.

Reason for Taking the Loan

The top up loan can be taken if you feel you are running out of cash. However, you can use the amount as you wish.

Personal loans can be taken for various purposes like wedding, travel, education, and more.

How Do Top Up Loans Work?

Suppose you take a personal loan of ₹ 2 lakh at an interest rate of 13% for a repayment tenure of 2 years. After paying the EMIs for 2 years, a sudden need arises and then you apply for a top up loan of ₹ 2 lakh from the same lender for another 2 years. Since top up loans are offered at lower interest rate, you get a top up on your existing personal loan at 11%. 

In this way you will pay lesser interest as compared to your previous personal loan. To see the difference, have a look at  this comparison table below.

Loan Type 

Amount

Interest Rate

Tenure

EMI

Total Interest

Personal loan

₹ 2 lakh

13%

2 years

₹ 9,508

₹ 28,200

Top up loan

₹ 2 lakh

11%

2 years

₹ 9,321

₹ 23,717

FAQs

Q1What is a Top-up loan?
A top up loan is a loan over an existing loan. The existing loan can be a personal loan or a home loan. The best part of a top up loan is that you can enjoy a lower interest rate than the original loan.
Q2Who can apply for a top-loan?
The eligibility criteria for a top up loan differ from one bank to another but any salaried or a self-employed person can avail a top up loan facility on an existing loan after a certain period.
Q3How to Apply for a Personal Loan Top Up?
There are two ways to apply for a top up loan on personal loan: 1. You can ask your current lender to top up an existing personal loan by showing you repayment history and credit behavior. 2. If your current lender denies for a top up loan, you can simply transfer your outstanding personal loan balance to a different bank and then you can apply for top up loan.
Q4What is the difference between a balance transfer and a top up loan?
There is a huge difference between a balance transfer and a top up loan. When a person shifts his outstanding loan balance to another bank, it is known as balance transfer. On the other hand, if the same person asks to extend his current borrowing from the existing lender is known as top up loan. However, one thing is common between these two forms of loans is the borrower always enjoys the benefit of lower interest rate on the existing loan.
Q5What are the different types of top up loans?
Generally, there are two kinds of loans that can be looked at when it comes to top up loan – personal loan and home loan.
Q6How much a borrower can ask for a top up loan?
The amount of top up loan varies from one bank to another and it keeps on changing so kindly check it with your lender or you can also check the offering of the different banks. If other banks are offering more amount than your current lender, then you can transfer your outstanding loan to another bank and then you can ask for a top up loan.
Q7What is the maximum and minimum tenure of the top up loan?
Every lender decides the top up loan eligibility criteria based on the customer’s credit profile, repayment history, credit mix, etc. Hence, there is no point in discussing the tenure of top up loan but to understand this, you must know that as the loan is extended so is the tenure. However, you must aware that the tenure can’t be extended from the original loan tenure.
Q8How to be eligible for a top up loan?
The eligibility criteria for the top up loan is pretty simple. In fact, if you have taken a loan from the bank and have a good repayment history, you can easily apply for a top up loan after a certain time. Top up loan requires minimal documentation which if beneficial for the quick fund seeker.
Q9What to do when current lender refuses to offer top up loan?
Suppose, a current lender rejects your top loan application then you can transfer your outstanding balance to the new lender and ask for a top up loan. But before you transfer your loan balance to the new bank, please ensure that the new bank has given you the nod for this.
Q10Are there any tax benefits under the top loan scheme?
Tax benefits can be availed only if you are using the top up loan amount for purchasing or constructing a house and renovating an owned house. However, if you purchase or construct a house you can get tax exemptions under Section 80c. On the other hand, if you’re renovating a pre-owned house then you can enjoy tax exemptions under Section 24.