Debt, or what we often refer to as a "loan," plays a significant role in our finances and lives. Loans provide us with the means to not only manage our financial plans, such as buying a house, or vehicle, or running a business, but they also come in handy when we need money for medical expenses, educational purposes, or leisure activities. However, as much as loans act as a booster in our journey toward our goals, it is important to exercise caution while choosing the debt type, ensuring that it is the right fit for your needs.
Two such loans which are often taken by people are Personal Loans and top-up loans. A Personal Loan is an unsecured loan type that is known for offering instant cash. A reliable source of income and a good credit score guarantee the possibility of obtaining Personal Loans at competitive interest rates. Whereas, top-up loans, as the name implies, are obtained as an addition to previously existing loans, most frequently over an existing Home Loan. Depending upon the existing loan, top-up loans can be either secured or unsecured.
A Personal Loan is a kind of unsecured loan that banks, NBFCs, and online lenders offer to borrowers seeking funding for their own needs. Your income, credit score, and repayment history are used by lenders to evaluate your loan eligibility. Since the advent of online lenders, it’s very easy to access online Personal Loans. All you need to do is fill in an online form, attach the Personal Loan documents required for evaluation and sit back and relax. Once the lender reviews and approves your Personal Loan documents, the loan will be transferred to your account instantly. With lenders like Poonawalla Fincorp, the Personal Loan approval process is convenient, hassle-free, and requires minimal documentation.
There are no restrictions to the end-use of Personal Loans. Unlike Business Loans or Home Loans, Personal Loans can be used to fulfil any goal or meet any financial need. You can use a Personal Loan to pay for a vacation abroad, complete house renovations, buy new furniture, pay for a medical emergency, etc.
A top-up loan is a loan taken over and above an ongoing, existing loan. The existing loan could be a Personal Loan, a Home Loan, or even a Business Loan. There is a misconception that top-up loans are available only on existing Home Loans. That’s not true; as long as your lender has a top-up loan facility available, they can be taken over different types of loans. Depending on the underlying loans, top-up loans can be secured or unsecured. Based on this, the specifics of the top-up loans will be set. E.g.- if the existing loan is collateral-based, the top-up loan may be given as a percentage of the value of the security. There could be certain stipulations for qualifying for a top-up loan. E.g.- the borrower should have completed a certain number of EMI payments on the underlying loan before becoming eligible for a top-up loan.
Let us discuss some key attributes that make Personal Loans and top-up loans distinct from one another:
Based on this example, and the other factors discussed here, one can understand that there is no universally applicable advice for such decisions. Both loans have their advantages and disadvantages. It is on the borrower to understand which loan would best fit their set of requirements and situation.
There are various documents required for Top Up and Personal Loan. As a borrower, you need to submit the below-mentioned documents:
These documents might change from lender to lender. It is advised to check the documents on the lender’s official website to avoid any confusion and delay.
While applying for Top Up and Personal Loan, you need to meet the minimum set criteria by the lender. These eligibility criteria differ from lender to lender. As a borrower, you must check all the requirements beforehand. Below are the eligibility criteria for Top and Personal Loan that you must meet:
Hence, in conclusion, a top-up loan can provide the benefits of a less time-consuming documentation process, faster approval etc. On the other hand, a Personal Loan does not have any end-use restrictions, which can be very helpful when you have multiple needs. Choose only after thoroughly going over the lending options and your requirements.
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