Personal Loan Vs. Top-Up Loan: Which Is Better?

Personal Loan Vs. Top-Up Loan: Which Is Better? Being emotionally and mentally free from concern for the unknowns in life is a major component of financial independence.  Many people encounter events that alter their lives daily. There can be a point in these circumstances when financial assistance is required. These days, obtaining the necessary financial assistance through loan applications is rather simple and cosy.

People from all walks of life occasionally use loans as a means of raising much-needed additional cash and meeting unforeseen financial necessities. In India's financial industry, banks and other financial institutions introduced a range of loan packages in response to the country's increasing demand for loans.

After a sudden financial emergency, credit borrowers have a variety of options when searching for loans. Because they are the most popular, top-up and personal loans would prevail in a sea of offers. These two loans are not the same as one another, despite common assumption. Each has advantages and disadvantages, so it's important to understand which loan would be best for them. Making sense of the distinction between a personal loan and a top-up might aid someone in making choices.

What Is a Personal Loan?

One type of unsecured loan that doesn't need collateral is a personal loan. Lenders consider a number of variables when evaluating a borrower's eligibility for a personal loan, such as income, credit score, and repayment history. It's easy to apply for personal loans online. All you have to do is fill out an online form and provide the required documentation. The loan money will be sent into your account as soon as the lender has reviewed and approved your documentation. The disbursement of personal loans from lenders such as Investkraft is easy, simple, and involves no paperwork.

What Does a Top-Up Loan Mean?

A top-up loan is obtained in addition to an already-existing loan. The current loan can be a home loan, a personal loan, or any other kind of debt. It is a popular misconception that top-up loans are exclusively applicable to pre-existing house loans. But that's not accurate. As long as your lender offers a top-up loan option, you can use them to pay off other debts, including personal loans. Nevertheless, in order to qualify for a personal loan top-up, there can be conditions that need to be satisfied. For example, the borrower has to have paid a certain number of EMIs on his present loan in order to be eligible for a top-up personal loan.

Personal loan vs. top-up loan

If you are confused between personal loan and top-up loan, below is the difference between these two types of loans. The following comparison would help you choose the best option given your specific needs.

1. Borrowing Source

Personal loan: If you match the requirements and can provide the necessary paperwork, you can obtain a personal loan from any lender.

Top-up loan: This type of loan is only available in addition to your current personal loan from the same lending provider. You must transfer your current outstanding loan to the new lender to receive the top-up from another lender.

Read More: What Are the Benefits of a Personal Loan?

    2. Loan Tenure

Personal loan: Depending on the lender, personal loans have different terms. You may easily repay the personal loan with Investkraft over a maximum 60-month term.

Top-up credit: The period of a top-up loan is flexible and frequently matches the duration of your existing personal loan.  

     3. Interest Rate

Personal loan: The lending institution determines the interest rate for personal loans. A personal loan's interest rate is also affected by a number of other factors, such as your age, credit score, job history, and income.

Top-up loan: Since this is an extension of your current personal loan, you have the option to bargain with your lender for a lower interest rate.

Also Read: How to Calculate Interest Rate On a Loan

     4. Maximum Loan Amount

Personal Loan: Each lender has a different maximum amount that a borrower may be eligible for. The loan amount is nonetheless affected by a number of variables, including your credit score and additional qualifying requirements. You need little paperwork to borrow up to Rs. 40 lakh with Investkraft.

Top-up loan: Typically, a top-up loan equals a certain portion of your current personal loan. The loan amount may vary based on the lender and the kind of current loan.

     5. Processing Time

Personal loan: Because the lender does a comprehensive background investigation that includes confirming personal loan documentation, credit score, past loan repayment history, stable income source, age, and other factors, processing a personal loan takes some time.

Top-up loan: The processing time for your top-up loan is streamlined because the lender already has your payback history and validated papers. When borrowers make timely EMI payments on a personal loan, lenders usually want to give them a boost.

Personal Loan: Each lender has a different maximum amount that a borrower may be eligible for. The loan amount is nonetheless affected by a number of variables, including your credit score and additional qualifying requirements. You need little paperwork to borrow up to Rs. 40 lakh with Investkraft.

Top-up loan: Typically, a top-up loan equals a certain portion of your current personal loan. The loan amount may vary based on the lender and the kind of current loan.

FAQs

1. What Happens if I Don't Make My Monthly Payments On My Loan?

Your credit score may suffer if you miss a payments. All of the loans you take out in the future will have higher interest rates. You should speak with your banker to see whether you qualify for debt consolidation or if the loan conditions may be changed in order to prevent payment default.

2. When I Take Out a Top-Up Loan, What Happens to My Current Loan?

Every time you take out a top-up loan, a brand-new loan account is created. The amount owed on the new top-up loan as well as the current loan will be deposited into this new account.

3. Does My EMI Payment Obligation Continue Until the Top-Up Amount is Authorised?

Yes, until the top-up loan amount is approved and sent into your account, you must make your current EMI payments. If you don't, you can fall behind on your loan payments and have a bad credit score.

The Conclusion

In conclusion, a person's unique situation and financial needs will determine whether they choose a personal loan or a top-up on an existing personal loan. Before making a decision, make sure you thoroughly weigh the benefits and drawbacks of each alternative. It is critical to select a loan that satisfies your immediate requirements while also supporting your financial objectives and enabling you to effectively manage debt. You can make the best financial decision for your circumstances by using our financial tools, such as the interest and personal loan EMI calculators.