Guide to get top-up loan in India

What is Top Up Loan?

A top up loan is a loan offered by lenders which is higher than the amount of loan applied for under a main loan category, such as personal loan, home loan, education loan, and so on. One can only apply for a top up personal loan if they have an existing relationship with the lender. If they have a loan and a certain duration of time has passed since the original loan has been disbursed. If the borrower’s current lender doesn’t provide top up loan, the borrower has the option to transfer their loan to another lender or bank, from whom they can apply for their top up loan instead. Compared to a personal loan, it’s preferable to opt for a top-up loan since the customer already has a relationship with the lender; therefore, application process is much easier with minimal documentation. Also, they come with lower rates of interest and nominal processing fees. This is why top-up loans are better for borrowers who are currently repaying an existing loan, as compared to taking a personal loan.It’s important to remember that not all applicants are automatically approved for top up loans from their bank or lender. The lender will still always factor in the borrower’s finances, repayment capacity and other outstanding loans while assessing the application for a top up loan.

Why You Should Apply for a Top-Up Loan

There are various reasons why lenders provide top up loans to customers. Here are some reasons why you should consider taking a top up loan:Add-On to Existing Loan: Customers who have already applied for a particular type of loan can avail a top up loan as an adjunct. For example, a customer who has taken a home loan can apply for a top up loan for purposes such as additional renovations, repairs, furnishing, etc.Debt Consolidation: Customers who have multiple outstanding debts can apply for a top up loan in order to consolidate all their loans into one, thereby reducing the overall interest to be repaid. This comes with the added benefit of helping the customer to improve their credit score, as multiple outstanding loans damages a customer’s credit scoreAdditional Financial Requirements: A customer who has taken a personal loan for a particular purpose, such as a home loan, can also apply for a top up loan for other requirements such as paying education fees, family functions, medical expenses, and so on.

Features of Top-Up Loan

Below, we’ll discuss some important features of top up loans: In order to apply for a top up loan, the customer must be an existing customer Borrowers can take top up loans for purposes that the funds of their existing loans cannot meet Depending on the lender, top up loans usually do not exceed the amount of the original loan availed With top up loans, the maximum loan amount provided will vary from lender to lender Top up loans can be repaid in easy EMIs. Lenders such as Upwards combine both the primary loan and top up loan for easy repayment for the customer As top up loans are provided to customers who have already taken a loan from the lender (and have therefore completed basic screening), they can get approved for top up loans quicker than it would to apply for a separate loan. Some customers who have multiple loans and debts can apply for a top up loan, so as to consolidate their debts, while improving their credit score and reducing the overall interest paid.

Benefits of Top-Up Loan

Those who have taken a loan generally go for a top up loan if they have additional financial requirements, instead of applying for a new loan. Let’s take a look at some important benefits of top up loans.Lowers Loan Burden: Since top up loans can be availed in addition to an existing loan in order to repay other debts, it can help the customer to reduce their overall burden. By consolidating all debts, the overall interest gets reduced- this is one of the main reasons existing customers choose to go for a top up loanDocumentation: For top up loans, the documentation required is quite minimal. This is because the applicant has an existing relationship with the bank or lender, who in turn, have already vetted the customer’s details. Any additional documentation required for top up loans may slightly vary from lender to lenderFast Processing: As both the lender and customer have an existing relationship due to the original loan, the lender is able to process the customer’s top up application much faster than a new loan application. As a result, the loan disbursement is also quicker. The customer can get access to funds much more rapidly in order to utilize them for their needsNo Collateral Required: As unsecured loans require no collateral, the borrower is saved from the time and hassle of arranging assets to pledge against the loan.Lower Interest Rate: Another benefit of top up loans is that many lenders offer them at attractive interest rates, compared to other loansEMI consolidation: Top up loans allow customers to pay back their original and top up loan via EMI. It decreases the burden of making multiple payments every month and will also lower the chances of forgetting to pay your loan EMILong Repayment Tenure: While availing a top up loan, the repayment tenure will vary according to the loan amount you are applying for, the borrower’s current outstanding balance, and their repayment ability. Although a top up loan can have a longer repayment tenure than that of a personal loan, the tenure of the top up loan cannot go beyond the original’s loans current outstanding tenureBalance Transfer: Certain banks may provide top up loan on the basis of balance transfer. This means that if you’ve already taken out a personal loan from a bank, but they don’t have a top up loan facility, then you can transfer your loan to another lender. Balance transfer can help the borrower meet additional financial requirements with ease.

Frequently Asked Questions (FAQs)

Many people are unaware about the concept of top up loans. Below are some frequently asked questions on top up loan.Up to what amount can I get a top up loan from UpwardsIf you have already taken a loan on Upwards and are looking for a top up, you are eligible for a top up loan of up to Rs. 2,00000How can I apply for a top up loan from Upwards?As an existing customer of Upwards, one can simply contact their customer support executive in order to apply for the top up loan.What is the longest tenure available for a top up loan from Upwards?The tenure for a top up loan depends on the customer’s details such as their profile, repayment behaviour, and so on. At Upwards, the What is the eligibility criteria for a top up loan?Any customer who has availed a loan from Upwards is eligible to for a top up loan. The procedure and documentation for a top up loan is very minimal since KYC process has already been completed.Usually, a top-up loan can be sanctioned for a longer tenure than a personal loan. The best part is that most banks allow customers to repay their top-up loans in the form of affordable EMIs. The tenure of the top-up loan cannot be longer than the outstanding tenure of the original loan.Can I apply for a top up loan if I currently have more than one ongoing loan?In order to be eligible for a top up loan, it is compulsory to have at least one current ongoing loan. However, having multiple simultaneous loans can reduce your credit score since the increased financial burden of repaying them can put you at risk of default. You can still go ahead and apply for the top up loan and allow the lender to approve your application.Are there any tax benefits I can receive if I receive my top up loan?If a borrower applies for a top up loan to buy a home, they can receive tax benefits as per Section 80C. For maintenance, repairs, and renovations after the Completion Certificate has been issued, or after the house has been occupied or rented out, then one can receive tax benefits under Section 24.However, in case an individual has availed a top up loan for other expenses such as paying medical bills, high utility bills, purchasing a vehicle, etc. then the individual is not eligible for any tax benefits.If I have urgent financial requirements, should I apply for a personal loan or a top up loan?Top up loans have a faster processing time, lower interest rates and require less documentation. Instead of starting the process from scratch, you can speed up the process by going for a top up loan. It’s important to remember, as mentioned earlier, that one must be an existing customer of the lender in order to be eligible for a top up loan.

Snneha Lukka

April 2,2019