A top-up personal loan is additional funds offered to you by your lender, with whom you have an ongoing personal loan.
When you have an ongoing personal loan, and you require more funds, the lender can extend a top-up loan to you. A top-up loan is another loan, but with a shorter application and approval process, as you have already shown your creditworthiness and repayment ability with the ongoing loan.
Now let’s try to learn about top-up loans in detail.
A top-up loan may sound very much like a new loan, but it is not. Here are some benefits of taking a top-up loan -
Top-up loans are easily available compared to other new loans. This is because you already have an ongoing loan with the lender. If you have been paying the EMIs on time, you will already have a good relationship with your lender, which will help you further.
You can apply for a top-up loan online through the net banking portal or mobile banking apps of your lender or bank. The applications are easy to complete and can be done on the phone with a few clicks as well.
Due to you having an ongoing loan with the lender, your top-up loan will generally get approved very quickly. Often, you will get pre-approved offers from your lender for taking top-up loans, too.
Just like personal loans, top-up personal loans are also unsecured. Thus, there is no need for a guarantor or any collateral.
Just like your personal loan, your top-up loan will also have flexible repayment periods. You can choose your repayment period based on the options provided to you by your lender.
Suppose you have taken a personal loan of ₹1 Lakh from a bank. After a few months, you again find yourself in a situation where you need funds urgently.
In such a situation, you can approach the same bank for a top-up loan. If you have been paying your EMIs on time and your repayment history is spotless, the bank will happily give you a top-up loan.
They will offer you extra funds along with your ongoing loan. In most cases, you will be able to merge the two EMIs and will not have to keep track of two loans. Top-up loans are a great option instead of taking a new loan.
The eligibility criteria for a top-up loan will vary from lender to lender. However, here are some of the general criteria that you need to meet to be able to get a top-up personal loan -
Having an ongoing personal loan with the lender
Having paid a portion of the previous loan
No missed or delayed EMI payments
Good credit history and a low credit utilization ratio
Usually, you will not need to submit any extra documents to get a top-up personal loan. Your documentation requirements must have been fulfilled while you were applying for the original personal loan.
Thus, only your basic identity proof and a signature would be enough to get a top-up loan approval.
Please note: Documentation requirements and eligibility criteria vary depending on the bank or lender. Please contact your lender before applying.
Here are the steps to apply for a top-up personal loan -
STEP 1: Visit the website or download the mobile app of your bank. You can also visit your nearest bank branch or contact them via customer care.
STEP 2: Click on any option that says ‘Apply for top-up loan’. Or enquire about the same.
STEP 3: Complete the application process and upload any necessary documents.
STEP 4: Once the loan is approved, the money will be credited to your bank account within a few days.
When you need funds and you have an ongoing loan, you have two choices. You can either apply for a top-up loan or a fresh personal loan. Here are how these two are different -
|
Criteria |
Top-up Personal Loan |
Fresh Personal Loan |
|---|---|---|
|
Loan amount |
Limited to the ongoing loan amount |
Depends on eligibility |
|
Eligibility |
Should have an ongoing loan with the lender |
Open to fresh applicants |
|
Interest rate |
Lower, as you are already a customer |
Depends on your credit score and other factors |
|
Repayment tenure |
Similar to the ongoing loan |
|
|
Approval and disbursal time |
Very quick |
Depends on the lender’s rules and regulations |
Financial emergencies can come at any time. You might need to take a loan while you have ongoing loans. Sometimes, you can avoid applying for a fresh loan and opt for a top-up instead.
This will help you save both time and effort. Top-up loans are easy to get if you have been paying your EMIs on time. So, reach out to your existing lender and see if you qualify for a top-up loan.
When you get extra funds from the same lender, under the terms and conditions of an ongoing loan, it is referred to as a top-up loan.
Yes, if you need a small amount, opting for a top-up loan instead of a fresh loan is a good idea. They are also helpful since you don’t have to go through a fresh application process and remember another repayment schedule.
When you top up a loan, the extra funds get added to your ongoing loan. This way, you can keep paying the new EMI amount and repay the loan in a similar way.
Yes, even though it gets clubbed with your ongoing loan, it will affect your credit utilization. It has the potential to hurt your credit score if you miss your EMI payments.
Every lender will have different rules as to how many EMIs you should have paid before being eligible for a top-up loan.
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