Personal Loan Top-up
What is a Top-Up Loan?
A top-up loan is an additional loan amount granted by a lender to a borrower on top of their existing personal loan, allowing them to access extra funds while maintaining their original loan agreement.
How to Apply for a Personal Loan Top-Up?
- You can apply for a top up loan from your existing lender. If you already have an active loan, and if your lender offers the option of an additional loan, you can apply for the top up loan.
- In case your existing lender does not offer a top up loan, you can shift an active loan from your present lender to another through a balance transfer. After the balance transfer, you can apply for a top up loan from your new lender.
Example:
Let us start with an example here. Say, you drive a car and on a monthly basis you fill up the car with fuel worth Rs.2,000. However, on a particular month, you had to use the car more than what you usually do. So, on the 20th of that month, you see the 'low fuel' indicator blinking on your dashboard. What do you do? You obviously go to the nearest petrol station and get your car filled up for another Rs.1,000 (say). That is exactly how top up personal loans work.
Top up loans are one of the credit options that can be used by an individual in case of emergencies where he or she falls short of cash. Top up loans are credits that are taken in the form of an addition to an already existing personal loan. Most financial institutions offer top up loans for personal loans and home loans. If you have an existing personal loan which is still active, and you realise that you would need more fund, you can apply for a top up loan. A top up loan is also sanctioned faster than a usual personal loan as the paperwork is already done with the financial institution at the time of applying for the original personal loan.
Features and Benefits of Top-Up Loan
- Emergency Funding: A top-up loan provides quick access to funds during critical times, helping you manage unexpected financial emergencies effectively.
- Easy and Fast Disbursal: With an active personal loan, a top-up loan is processed quickly, ensuring the additional funds are disbursed in minimal time.
- Minimal Documentation: In most cases, you won’t need to submit extra documents for a top-up loan, as the paperwork was completed when you took the original loan. This makes the process quicker and easier.
- Lower Interest rates: A top up loan generally charges lower interests than a fresh personal loan.
- Flexible payment method: You can easily repay the loan through convenient EMI options.
- Tax benefits: Based on the purpose for which you use your top up loan, you can avail tax benefits for the same. For example, if you use the money for the renovation of a house property, towards education, and so on, you will be eligible to claim tax benefits against the same.
Eligibility Criteria for Top-Up Loans
The eligibility criteria for top up loans vary from bank to bank. However, there are certain generic conditions which are taken under consideration. These factors can be summed up as follows:
- Repayment record: Personal loans are unsecured loans. Thus, a top up on a personal loan will also be unsecured. In these cases, the lender has to reduce the risk factor as much as possible. In order to be eligible to get a top up on a personal loan, you will be required to have a repayment record which is clean. Having a clean repayment history implies that the risk factor is minimal.
- Having an active loan: A top up loan is provided on a loan which is already active. Thus, you need to have an existing loan to be able to apply for a top up loan.
Documents Required to Apply for Top-Up Loan
The documentation process for top up personal loans is quite nominal as the paperwork and documentation are already done and validated for the existing loan. The usual documents which are required for the application of a personal loan are as follows:
- Proof of Identity such as passport, Aadhaar card, Election Commission card, PAN card, and/or driving license.
- Salary slips for 3 months (in case of salaried applicants).
- Proof of Residential address such as rental agreement, passport, utility bills, etc.
- Income details in bank statement for 3 months.
- Passport-sized photographs.
A number of banks and financial institutions offer top up options on existing personal loans. Some of the banks and/or financial institutions that offer top up loans on personal loans in India are listed below:
1. SBI Personal Loan Top-Up
- Bank - State Bank of India
- Interest Rate (p.a.) - 12% to 14.75%
- Min. loan amount (₹.) - 25,000
- Max. loan amount (₹.) - 15 lakh
Benefits
- Enjoy low interest rates.
- Interest charged on the basis of daily reducing balance.
- No hidden costs associated.
- Minimal documentation process.
2. HDFC Bank Personal Loan Top-Up
- Bank - HDFC Bank
- Rate of interest (% p.a.) - 10.40% onwards
- Min. loan amount (₹.) - At the discretion of the bank
- Max. loan amount (₹.) - At the discretion of the bank
Benefits
- Check your eligibility for a personal loan in 1 minute at select HDFC Bank branches and the official website.
- Get your loan amount sanctioned within 1 day from the date of submission of documents.
- Pre-approved HDFC Bank customers can get a loan within 10 seconds.
- Low interest rates.
3. Axis Bank Personal Loan Top-Up
- Bank - Axis Bank
- Interest Rate (p.a.) - 15.75% to 24%
- Min. loan amount (₹.) - 50,000
- Max. loan amount (₹.) - 15 lakh
Benefits
- Documentation process is minimal.
- You can choose from a repayment tenure of 12 months to 60 months.
- You can use the Personal Loan EMI Calculator on the bank website to find out the exact amount of interest that you would be required to pay.
4. IDFC First Bank Personal Loan Top-Up
- Bank - IDFC Bank
- Interest Rate (p.a.) - 12% to 19%
- Min. loan amount (₹.) - 50,000
- Max. loan amount (₹.) - 20 lakh
Benefits
- Choose from a tenure of 3 months to 60 months.
- Low interest rates.
- Check your eligibility for a personal loan easily on the bank website.
5. Bank of Baroda Personal Loan Top-Up
- Bank - Bank of Baroda
- Interest Rate (p.a.) - 11.70%
- Min. loan amount (₹.)
Metro and urban – 1 lakh
Semi-urban and rural – 50,000
- Max. loan amount (₹.) - 20 lakh
Metro and urban – 10 lakh
Semi-urban and rural – 5 lakh
Benefits
- Choose your tenure of repayment as per your preference.
- Nominal interest rates.
6. Kotak Mahindra Bank Personal Loan Top-Up
- Bank - Kotak Mahindra Bank
- Interest Rate (p.a.) - 10.99% to 24%
- Min. loan amount (₹.) - 50,000
- Max. loan amount (₹.) - 15 lakh
Benefits
- Minimal paperwork.
- Fast and active customer service.
- Hassle-free processing and sanction of loan amount.
- Attractive interest rates.
- Flexible repayment options as per convenience.
Top-Up Loans vs Personal Loans – A Comparison
Point of comparison | Personal Loans | Top up Loans |
Interest rates | The interest rates are generally high. | When compared to personal loans, the interest rates are usually lower. |
Ease of getting a loan | As personal loans are unsecured loans, the risk factor is higher. This leads to the banks (and/or lenders) to set up strict criteria for the approval of loans. | A top up loan based on a personal loan is usually easier to get as the borrower has already passed the requirement of the lender at the time of disbursal of the original loan. However, in case of approval of a top up loan, the credit history of the borrower (repayment history, timely payments, and so on) is taken into consideration. |
Collateral or Security | A personal loan is an unsecured loan. No collateral or security is required against a personal loan. | A top up loan, being based on a personal loan, also does not require security or collateral against the loan amount. |
Purpose of the Loan | A personal loan has no fixed purpose of usage. It can be used by the borrower for any purpose. | A borrower can apply for a top up on a personal loan if he falls short of cash. There are no restrictions in terms of usage of the money. |
Conclusion: Should You Opt for a Personal Loan Top-Up?
Top-up loans are a convenient way to get extra money by adding to your existing personal loan. They are usually processed quickly with less paperwork and can offer lower interest rates compared to new loans. To make the best choice, compare the options from different banks and ensure you meet the eligibility criteria.
FAQs on Personal Loan Top-Up
- How is the loan amount decided in regard to a personal loan?
When an individual applies for a personal loan, a number of factors are taken into consideration such as the credit score, the repayment history, defaults (if any), total income, other active loans, and so on. The final amount of loan is decided on the basis of these factors.
- Do I need to provide a collateral for a personal loan?
No, a personal loan is an unsecured loan. This means that you will not be required to provide any collateral or security against the loan that you take.
- Why is the rate of interest high in case of personal loans?
Personal loans are unsecured loans. Thus, the risk factor is higher in the case of these loans. The interest rates are higher because of that.
- Can I foreclose a personal loan?
Yes, usually most banks and financial institutions allow the borrowers to foreclose their loans. However, it is recommended to check with your lender if you can avail the facility or not.
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