All you need to know about Top-up loan

All you need to know about Top-up loan

Sometimes, you may need some extra cash to overcome the financial crisis. How wonderful would it be if someone understands your desires and ready to help you. One such thing that fulfills the criteria is a top-up loan. The top-up loan is a helping hand provided by banks, financial institutions or housing finance companies so that you can easily fulfill your dreams with little more financial support.

What is a Top-up loan?

As the nomenclature suggests, A top-up loan is an extra loan amount that you can get on an existing home loan, personal loan or loan against property. It is same like you top-up your mobile balance if you have a low balance, likewise many banks, private and nationalized, offer top-up loans over a current balance to their existing customers. You can avail a top-up loan only when you have made regular loan payments on your existing loans and you are eligible to apply for the top-up facility by agreeing to the terms and conditions laid down by the bank.

A top up loan is one of the best options for borrowing money at a low cost. Avail top up personal loan or top-up home loan with the same bank or other banks at the time of balance transfer. If you are taking a top-up home loan. The time period of these can go up to 15-20 years, depending on your home loan’s term. The maximum tenure could be the same as the balance repayment period. However, it is based on your decision. Generally, the total of the outstanding home loan amount and the top-up loan does not exceed 70% of the property’s market value.

Interest rates on top-up loans are lower compared to personal loans. Interest rates on top-up loans are generally equal or 0.25 – 1% higher than your existing loan rates. At the current rates, Top up interest rates on personal loans are in the range of 11.24% to 25%. Similarly, for home loans, top up loan rates are in the range of 8.65% to 10.9%. Personal loan top-up rates are extension loans that can be availed at the same rate at which the existing personal loan was availed, subject to current market conditions. Their EMIs are low because of longer terms, while the loan amount you would be eligible for is higher.

The money received from a top-up loan can be used for a variety of other purposes also, like marriage expenses, business expansion, vacation, medical expenses, purchasing another property, gifting or even education. You can make use of this facility a year after your loan gets disbursed.

You should consider a loan top up if:

  • You would prefer to take long tenure funds at low-interest rates.
  • You need urgent funds to meet your personal requirements.
  • You want to get a loan with minimal and no documentation.
  • You already have an existing personal loan, home loan and property loan for which you have paid a stipulated number of EMIs.

Top-up loans may be the best choice available if you want to increase some cash for personal purposes. Do research on it before looking into other expensive options.