We all know that life is unpredictable. It often happens that after taking a personal loan, there is an emergency that you have to take a new loan soon. It could be a wedding in the family, putting down security deposits in your college or a sudden medical emergency. There is an option to seek loans from family and friends but in the quest to not let relationships get sour, some people look for different alternatives. For those seeking a second personal loan, top up personal loan is an option one could go for. In an essence, top-up personal loans allow customers to take out a loan in addition to their existing loan. Let us go through everything you need to know about a top-up personal loan.
What exactly is a personal loan top-up?
An additional loan from the present lender with the same interest rate is referred to as a top-up personal loan. Some experts believe that getting a top up personal loan is more practical than searching for a new loan from a different lender. Both the lender and the borrower benefit from this arrangement.
A loan that is added on top of an ongoing, existing loan of 10 lakh personal loan is known as a top-up loan. It’s possible that the existing loan is a personal loan, a home loan, or even a business loan. It’s a common misperception that top-up loans can only be used with current home loans. That is untrue; different forms of loans can be taken over as long as your lender has a top-up loan capacity available. For instance, if the existing loan is secured by collateral, the top-up loan may be provided at a percentage of the security’s value. There can be requirements to meet in order to be eligible for a top-up loan. For instance, in order to qualify for a top-up loan, the borrower must have made a particular amount of EMI payments on the underlying loan.
Ways to Increase Your Chances of Being Approved For a Top-up loan
Boost your credit rating: As you may know, the first factor used to evaluate your loan applications is a credit score that is generated by a credit agency. It is a number between 300 and 900 and a higher the score (usually above 750) is typically seen as favourable for approving a 10 lakh personal loan. Maintaining a good CIBIL score can be achieved by paying off your bills on time.
Keep your debt exposure low: If you have too many debts on your head such as credit card outstandings, it will show up in your bank statement. If the lender believes your total EMI would be more than 50% of your net monthly income, he might not be willing to provide you with a top up personal loan.
Control your monthly spending if it’s exceeding a limit: Refrain from spending your money unnecessarily. Doing this will enable you to increase your savings and help you better manage your money which you can use to pay off your existing debt and thus, bring down the debt ratio. This will increase your chances of your application getting accepted.
Apply for a reasonable amount: Make sure you apply for an apt amount should you decide to request a top-up. The likelihood of your loan of 10 lakh personal loan being granted will increase if you submit your application for a reasonable amount of loan. If you request a larger sum, it’s possible that the lender will question your ability to repay and deny the loan. If you request a larger sum, it’s possible that the lender will question your ability to repay and deny the loan.
Benefits of Choosing Personal loan Top Up
One of the easy ways to get through a financial crisis is to take out a top-up personal loan, which has reasonable interest rates, a flexible repayment schedule, and fast approval. Let’s discuss the benefits of personal loan top up
1. Use it for any purpose: The way a borrower must use the top-up personal loan is not specified by the lender. It is up to the borrower how they wish to use top up personal loan, whether it be for additional wedding costs or a renovation project that must be done immediately.
2. Helps you to Refinance your debt: If you need to pay off several loans, credit card balances, and other outstanding payments at once, you can do it via a top up personal loan. Also, doing this lowers the total interest rates you would pay on various loans. Also, since you would just be repaying your top-up loan, you won’t need to remember any other EMI dates. Your CIBIL score will increase as soon as you pay off your top-up loan and consolidate your previous loan obligations.
3. Get funds quickly: Your top-up loan application will be processed quickly provided you were making on-time payments on your current EMIs and have an excellent repayment history with your lender. Also, you can get your additional funds at competitive personal loan interest rates that you won’t get with any other lender.
4. No need to submit any other collateral: A top-up loan, just like a personal loan, is also available without pledging any collateral. As a result, you can quickly access additional cash when you need them without having to put up any security or deposits and furthermore requires little paperwork.
But what to choose- A top-up loan or a personal loan
Source of Borrowing: As long as you meet the eligibility criteria of a lender, you will get a personal loan of 10 lakh personal loan but the top-up loan, is available on top of your loan. In case you want to get the loan from another lender, the borrower will be required to transfer the whole outstanding loan to the new lender.
Tenure: The tenure of a personal loan of 10 lakh personal loan is usually up to 5 years whereas the tenure of a top-up loan is quite flexible.
Interest rates: The interest rate on a personal loan depends on various factors like your income, employment details, age, credit score, etc. The interest rate on a top-up loan depends on the underlying existing loan.
A top up personal loan comes with less time-consuming documentation if compared with a personal loan and both of the options come with no end-use restrictions which can be very helpful when you have multiple needs.