Repaying an existing loan while trying to manage other expenses can be hectic. Perhaps you already have a personal loan and suddenly need funds. In such a situation, a Top-Up Personal Loan might be exactly what you are looking for. It’s fast to process, flexible in its use, and frequently cheaper than a new loan.
We will explain what top-up personal loans are and when they make the most sense to be used.
What Is a Top-Up Personal Loan?
A top-up personal loan is an additional amount of loan that can be availed from the existing lender. This is available only to those who have already taken a personal loan and have a good repayment record.
Consider it an upgrade on your current loan. Instead of applying for a new loan, you simply add more finances under the same agreement and relationship on which your current loan is based.
How Does It Work?
Let’s imagine a scenario. You took a personal loan amounting to ₹5 lakhs, and you have repaid around ₹2 lakhs till now. Now, if due to unfortunate circumstances, you need additional funds of up to ₹2 lakhs for instant loans for payday. Instead of applying for a new one, you can simply go to your current lender and request for a top-up loan, and if you qualify, the required funds will be given to you quickly with minimal document processing.
Eligibility Criteria for a Top-Up Personal Loan
To qualify for a top-up loan, you generally need to:
- Have an active personal loan with the particular lender
- Possess a clean repayment record (12+ months of EMIs with no defaults)
- Fulfill your lender’s credit score and income expectations
- Possess no records of missed payments.
Benefits of a Top-Up Personal Loan
1. Faster Processing
Being their client allows quicker verification and paperwork processing.
2. Minimal Documentation
More often than not, the process is fully automated which saves time and resources.
3. Lower or Similar Interest Rates
If market interest rates were to drop, top-up loans can be offered at equal or even lower rates than the associated loan
4. Flexible Usage
Just like any other unsecured loan, you can utilize the funds for any expenses, such as medical, educational, travel, renovation, wedding, or others.
5. Single EMI Option
In some cases, lenders allow you to consolidate the new top-up amount with your existing loan so that you only incur one EMI payment
Conclusion
With an outstanding loan and a good repayment history, a top up personal loan is prudent for someone looking for money urgently. As compared to a new loan, it is faster, cheaper, and easier to access. It is essential to evaluate one’s financial capacity before increasing debt burden.
FAQs
- Can I get a top up loan from a different lender?
Typically no, as top-up personal loans are restricted to your existing lender.
- Is the interest rate the same as my original loan?
Not necessarily; it can be the same or even slightly lower depending on your credit profile and prevailing market conditions.
- How much top-up can I get?
This is determined by your repayment history, your outstanding balance, and your income levels.
- Will it affect my credit score?
Yes. A top-up, like any other loan, affects your credit score. Positively if repaid on time, negatively if not.
- How soon can I apply for a top-up after a personal loan?
Usually, about 6-12 months after paying the loan consistently and on time. But this differs from lender to lender.