Top up personal loan major pointers to consider

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Personal loans have huge benefits attached that prove to be a massive stress relief during financial emergencies. In case you have already availed a personal loan and now facing a sudden expense like marriage, child education etc., you will have 2 choices:

       Avail a top up loan

       New personal loan

A top up personal loan is provided by an existing personal loan lender, while a new personal loan can be availed from both a new and existing lender. In case you are already repaying EMI for your personal loan, you opt for the option that will keep your payment obligations to a minimum.

So, the question is, should you avail top up personal loan? Read on to know the answer and all-important details you must know about top up personal loans.

What is meant by a top up personal loan?

Top up personal loan is additional loan proceeds, which can be taken up on the existing personal loan. You might be eligible to make an application for a top up personal loan if you have the habit of making regular repayments on the existing personal loan. An application for a top up personal loan can be made with the same or different bank by opting for a balance transfer option. The top up personal loan interest rates are normally nearly 0.25 to 1 percent higher than the existing personal loan rates.

Top up personal loan interest rates are usually in the range of between 9.85 % and 23 % p.a. Top up personal loans can be availed easily from leading banks like HDFC bank, Axis bank, SBI etc., as these banks provide loans at a comparatively lower rate of interest of 6.90 percent p.a.

When should you avail the top up personal loan option?

You can avail top up personal loan if,

       You need immediate finances for mitigating your financial obligations.

       You require urgent funds for vacation, business expansion, marriage expenditures etc.

       You prefer to avail of long repayment tenure loans at a low rate of interest.

       You have an existing personal loan for which you paid a specific number of EMIs.

       You look to avail of a loan, which requires no or minimal documentation.

Crucial factors you must consider when availing top up personal loan

When borrowing any type of loan, you should always make rational decisions by analyzing your current situation and factoring in your financial future. To help you through the decision-making procedure, shared here are specific key factors that can assist you in reviewing your top up loan and new personal loan.

       Interest rate: Top up personal loan interest rate is the same as a personal loan. If you get a lower interest rate than what is provided in the market, you must ensure to make the most out of it. Otherwise, you should negotiate with your existing lender to bring down your rate as per your preference. In case this does not work, you can avail a fresh personal loan to lower your monthly loan obligations. In case you are looking for a benefit, the rate of interest must be minimal, i.e., 2 percent to 4 percent below the existing interest rate. It will minimize your interest obligations and EMI.

       Repayment tenure: Top up personal loan is valid for up to the time the existing personal loan is into existence. Thus, if you are looking to avail top up personal loan after two years from the beginning of the existing personal loan, which is usually for five years, the overall loan (existing personal loan + top up) will continue until 3 years. It might enhance your EMI obligations more and will invite further adjustments into your regular financial routine.

For example, if you have availed a 5 lakh loan at an interest rate of 12 percent p.a. with a loan repayment tenure of five years, the outstanding balance would be Rs 3.34 lakh towards the end of two years. EMI obligation must be nearly Rs 11,122. Thus, the new personal loan EMI would increase to Rs 14,444.

Rate of interest on top up personal loan of leading banks

Bank Top up personal loan interest rate
State Bank of India Top up loan 9.60 percent – 16.40 percent p.a.
Axis Bank Top up loan 10.49 percent – 16.75 percent p.a.
ICICI top up loan 10.75 percent – 22 percent p.a.
HDFC top up loan 10.50 percent – 22 percent p.a.

 

FAQs 

1)       Should I avail a top up personal loan on the existing personal loan?

You can avail a top up personal loan by considering all parameters involved. It makes complete sense to borrow the money only when you require finances. It is because top up personal loans can be expensive, and you might end up paying additional interest via repayment.

2)       What are top up personal loan benefits?

One of the crucial benefits of a top up personal loan is that it is generally available at a lower rate than a new personal loan. Personal loan rates might differ between 11 and 24 percent p.a., and top up personal loan rates are the same as home loan rates.

3)       Can you use a top up home loan on your existing personal loan?

Yes, you can avail top up personal loan on the existing personal loan in case you are in immediate need of finances.

4)       Will top up personal loans impact your credit score?

However, a top up personal loan does not impact your credit score until you delay your loan repayment.

Ending note

 In case you are servicing your personal loan, ensure all the dues are repaid on time. It will assist in maintaining a strong credit score of 750 and above. Lenders usually will agree to your rate of interest terms if you have a strong credit record. Moreover, also ensure to keep the necessary personal loan documents handy. Personal loan documents required include your address proof, identity proof and income proof. 

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