What is a Top Up Personal Loan?
A personal loan has become a go-to for millions of Indians to finance their diverse cash needs. However, there can be instances where you may run out of these funds too. In such situations, a top-up personal loan can provide the additional financial support you need. It is a facility provided by banks and NBFCs where you can get an additional loan on your existing loan. This eliminates the need to go through the entire loan application and approval process all over again.
Considering a top-up personal loan? Here’s all you need to know about it.
Reasons Why You Should Apply for a Top Up Personal Loan
The reason behind applying for a top-up personal loan is beyond the fact that it’s easy to apply. While there are different types of loans available in the market to meet the diverse needs of people, it can get a little difficult to manage multiple credits. Usually, there’s no restriction on the end usage of a top-up personal loan. This way, you can get instant access to the cash you need without applying for too many loans. And because you’re taking a loan from an existing lender, you need not apply again and get instant access to the cash you need.
Features and Benefits of Top Up Personal Loans
Before you take a top-up personal loan, it’s important to understand exactly what it is and what are its features. Here’s how it works; consider you have taken a personal loan from a lender and are currently paying your EMIs for that loan. You suddenly need an extra source of cash. If your lender has a top-up personal loan facility, you can get an additional loan while repaying your ongoing loan.
Here’s how you can benefit from top-up personal loans:
Unsecured Loan:
Top-up personal loans are unsecured loans. This means that you don’t have to provide any security like gold, jewellery, shares, etc. to get access to the money you need.
Longer Repayment Tenure:
With a top-up facility, your repayment tenure increases, giving you more time to repay your total outstanding loan.
Lower Interest Charge:
A top-up facility means you’ve already established a relationship with your lender. If you’re a low-risk borrower and have paid all your EMIs on time, the lender may consider giving you a personal loan with a lower interest rate.
No Restriction on End Use:
One of the best parts about taking a top-up personal loan is that there is no restriction on the end usage of it. You can use it anywhere you like without any restrictions.
Increase Credit Score:
If you keep repaying your EMIs on time, it will automatically increase your credit score. A high credit score makes you a low-risk borrower which can help you unlock high-value loans at lower interest rates.
Documents Required for Top Up Personal Loan
Proof of photo identity
You will need to complete a real-time selfie verification to complete a KYC on Zype after you’re approved for a personal loan.
Mandatory documents
You will need to enter your PAN & Aadhaar number along with a few basic details to get a loan offer & to complete your KYC to activate your credit line. (Physical documents not required)
Proof of Income (Optional)
You can also apply for a higher credit limit by uploading your bank statement for the last 4 months.
Difference Between Personal loans and top up personal loans
| Reason for difference | Personal Loan | Top-up Personal Loan |
|---|---|---|
| Relationship with the lender | You can apply for a personal loan from any bank or NBFC | You can get a top-up personal loan from your existing lender if they offer that facility. |
| Repayment Tenure | Depending on you lender and type of personal loan,your repayment tenure can range from 3 months to even 10 years. | Usually, your repayment tenure of a top-up personal loan is similar to your current loan. |
| Approved Loan Limit | The personal loan amount you're approved for depends on many factors like your credit profile,income and even the limit of the lender. | Based on your lender's termsof borrowing , your top-up personal loan amount depends on the current loan limit. |
Eligibility Criteria for Top Up Personal Loan
While you can avail a top-up personal loan from your existing lender, you still have to meet a certain eligibility criterion to unlock that facility. Here’s the eligibility criteria you need to fulfil:
- You should have an existing relationship with a lender.
- Ensure you make all your EMI payments on time and have a clean repayment history with the lender.
- A good credit score, clean repayment history and strong credit profile increase your chances of unlocking a higher loan amount.
Please note that the eligibility criteria for a top-up personal loan can be different for different lenders.
Frequently Asked Questions
A top-up loan is when you borrow money on top of an existing personal loan. You can avail a top loan without any lengthy documentation or paperwork as you already have an established relationship with the lender.
The maximum top-up loan amount that you can avail depends on your current approved loan amount with the lender.
Yes, taking a personal loan on top of another loan is known as a top-up personal loan. You will have to ensure that your existing lender provides a top-up facility.
One of the most important rules for taking a top-up personal loan is that you make all your EMI payments on time and have a clean repayment history with your existing lender.
A disadvantage of taking a top-up personal loan is that you can avail this facility if you have an existing relationship with a lender who offers this facility.
The interest rate you’re charged on a top-up personal loan is the same as your existing personal loan.
Yes, it does. If you take a top up personal loan but don’t pay your EMIs on time, it may lead to a negative impact on the credit profile.
Top-up personal loans do not have any tax benefits.
One of the biggest criteria that sets personal loans and top-up personal loans apart is the source of borrowing. You can apply for a personal loan from any bank or NBFC, however, you can take a top-up personal loan only from an existing lender.