Managing financial needs can become easier when you choose the right borrowing option. Personal Loan and Top-Up Loan are two types of loans that both offer immediate funds with no security required. However, they vary in terms of intent, eligibility, cost, and usage.
Knowing the differences between a Personal Loan and vs. Top-Up loan allows you to select the right option based on your financial requirements. This guide breaks down both loan types to help you make an informed decision.
What Are Personal Loans?
A Personal Loan is an unsecured loan that can be used for various purposes, such as travel, weddings, medical bills, and more, providing you with extra money. First, lenders will examine your credit score, income, and ability to repay before approving your loan.
You can apply for a new Personal Loan online with ease and convenience. You just need to upload KYC documents, address proof, income proof, and other essential documents to expedite loan disbursal.
Also Read: Caution: Personal Loan Terms You Must Understand
What are Top-up Loans?
A Top-up Loan provides additional funds over your existing Personal Loan, Home Loan, Car Loan, or other loans. Several financial institutions offer a top-up facility to existing borrowers who maintain a good repayment record. A Top-up Loan can be secured or unsecured, depending on the original loan type.
For example, a home loan top-up has typically lower interest rates than a new Personal Loan because it is connected to a secured loan.
Most lenders require you to make timely EMI payments on your existing loan before providing you with a pre-approved loan offer. Approval for these loans is quicker because the existing lender is already familiar with your loan profile, and processing costs are often lower.
Personal Loan vs Top-up Loan: Key Differences
To determine which option is right for you, it's important to understand the key differences between a Top-Up Loan and a Personal Loan.
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Which Option Should You Choose?
Let's understand which loan option is best for you by looking at the following points:
Select a Fresh Personal Loan if:
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You need funds for new or unrelated expenses, such as travel, education, or medical needs.
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You want instant approval without holding an existing loan.
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You prefer choosing flexible repayment options.
Choose a Top-up Loan if:
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You already have a loan and need extra funds.
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You prefer lower processing fees and quicker approval.
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You have a strong repayment history with your current lender.
Also Read: A Quick Guide to Personal Loan Eligibility Assessment
To Conclude
A Personal Loan can help you cover new costs with convenient terms. In contrast, a Top-up Loan covers ongoing requirements related to your current loan, often at affordable interest rates. If you want lower processing fees, instant approval, and additional funds, a Top-up Loan from your current lender is the best option. For broader financial needs, apply for a new Personal Loan when you require more flexibility.
To simplify the process, explore the Poonawalla Fincorp Personal Loan. Enjoy benefits such as maximum loan amount, competitive interest rates, easy monthly payments, minimal documentation, and quick disbursement, helping you access funds with confidence.
FAQs
What if I close the existing loan before repaying the Top-up Loan?
Most lenders will demand that you close the linked Top-up Loan if you foreclose on your current loan. Many lenders treat the top-up facility and the original loan as related liabilities. Also, they expect that these loans will be settled jointly when the primary loan is closed.
Are Top-up Loans available on Business Loans or only on Home Loans?
Top-Up Loans are not limited to home loans. Many lenders provide them on Business Loans, Car Loans, or even on existing Personal Loans, depending on lender policies and your repayment history.
Does availing a Top-Up Loan change my EMI date or loan terms?
In most cases, the EMI date remains the same as your existing loan's EMI date, ensuring consistent repayments. However, your total loan tenure or EMI amount may change depending on the additional top-up amount and the lender’s assessment.
Can I get a Top-Up Loan if my credit score has dropped after taking the original loan?
Some lenders may still consider your application, provided you have a good repayment record and have been paying EMIs on time. However, having a low credit score may affect your interest rates. An excellent record with your current lender may enhance the chances of a pre-approved loan offer.
We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply