When you need funds and you already have a loan, you have to look for good options for financial assistance. Two of the options that are available in such a situation are taking a top-up loan or opt for a personal loan online apply through the lender’s website. To know which is a better option, you have to understand both in detail. There are several factors that need to be considered before choosing one over the other and therefore this understanding is very important.
- What Is It?
- Top-up Loan
This is a facility that allows you to take an additional loan of a certain amount on an existing loan that is being repaid. This can be taken on secured or unsecured loans provided you fulfil the terms and conditions
- Personal Loan
This is a collateral-free, unsecured loan that is provided to the customers based on their credit score and financial capability. Urgent personal loan can be used for any purpose that the borrower desires.
- What Is the Eligibility?
- Top-up Loan
A top-up loan is granted based on various factors. Some key ones are the repayment history for the original loan, the current financial capability and the credit score of the applicant. If the candidate has been paying the instalments regularly, the loan of a smaller amount is easily approved as a top-up loan.
- Personal Loan
The personal loan can be availed if you are in the favourable age bracket of 18-60 years and have a stable source of income. Your credit score and financial capability are the key factors that are considered for the approval of a personal loan. These are determined by the documents required for personal loan that include your identity proof, residence proof and bank statements. The eligibility criteria vary with the lending institution.
- What Is the Difference in Interest Rate?
- Top-Up Loan
If you take a top-up loan on your existing home loan, you pay a higher interest rate than the original loan.
- Personal Loan
The interest rate for a personal loan is much higher than a top-up loan on an existing home loan. It will also depend on your existing credit score.
- What Is the Typical Tenure?
- Top-Up Loan
Typically, the top-up loans must be paid up along with the original loan. The maximum tenure for these is 10 years. If you have 5 years left to clear your home loan, you can avail a top-up loan for 10 years. This could vary from one lender to another.
- Personal Loan
The tenure for a personal loan varies from 12 to 60 months.
- What Can This Loan Be Used For?
- Top-Up Loan
A top-up loan can be used for any emergencies in the family, for higher education, wedding expenses, a vacation, business expansion and even for the renovation of your home. You cannot use it for investing in speculative activities.
- Personal Loan
You can use the personal loan for anything you want. There are no restrictions on its usage. This is generally taken to meet unexpected expenses but may be used for recreational purposes as well.
- How Soon Can the Loan Be Processed?
- Top-Up Loan
A top-up loan can be processed in 15-20 days.
- Personal Loan
A personal loan needs 7 days or less for processing.
Which Is Better?
This choice will depend on your requirements. If you need the loan urgently, it is better to go for a personal loan. If you need a more affordable option, a top-up loan is the one to take. That said, the EMIs for a top-up loan are also smaller and can be paid up along with your existing loan. The other deciding factors include the availability, the eligibility, documentation and ease of processing. Analysing the options is important before making the final decision.
