Planning to take a loan can be a daunting task. There are various factors to consider, including the interest rate, tenure, and EMI. Learning which type of loan is a good fit for you is also challenging. A top-up loan is an additional loan facility offered by lending institutions to their existing loan customers. Borrowers use this facility to borrow extra funds at a relatively lower interest rate than other loans. A top-up loan has several benefits, including lower interest rates, no limitation on the usage of funds, easy repayment options, etc. Usually, Home Loan customers get to borrow extra money using this facility. The additional amount borrowed is known as a top-up loan and to know more about “What is a top up loan?” read below.
What Is a Top-Up Loan?
A top-up loan is a type of loan that allows you to obtain an additional loan on top of your existing loan. The additional loan amount is usually a small percentage of the original loan amount.
These loans are available for different types of loans, including Home Loans and are an excellent choice for anyone who initially underestimated their expenses and wants more funds.
It is important to note that not all borrowers can opt for a top-up loan. It’s only available to borrowers with a good track record who pay their EMIs timely without defaulting.
Benefits of A Top-Up Loan
Now that we have understood what a top-up loan entails, let’s learn about the benefits of a top-up loan.
Lower Interest Rates
One of the biggest advantages of a top-up loan is that it comes with a lower interest rate. Since these loans are only offered to borrowers with a good track record, lending the additional funds at a lower interest rate makes sense.
These loans have lower interest rates than personal or credit card loans. The interest rates for top-up loans are typically in the range of 8-12%, which is significantly lower than the interest charges for personal and credit card loans.
Sometimes, it is also lower than your current Home Loan interest rate. The lower interest rate can help borrowers save a significant amount on interest payments.
Quick Disbursal
Top-up loans are disbursed quickly since the borrower has already undergone the loan approval process. Many steps, including document verification, are not required for loan processing. So the time to disburse the loan amount is less and you’ll receive the amount quickly.
The lender already has the borrower’s credit score and repayment history, which makes the loan approval process faster. Quick disbursal is a relief for borrowers who are in urgent need of funds.
No Collateral Needed
Top-up loans are unsecured loans, meaning borrowers do not need to provide collateral or security against the borrowed amount. This is different from other types of loans, such as Home Loans, where the lending party ceases the collateral for security purposes if the borrower defaults on the loan. The lack of collateral makes top-up loans more accessible to borrowers with no assets to pledge.
Tax Benefits
Another exciting benefit of taking a top-up loan is that it allows you to claim tax benefits. Borrowers can avail tax benefits on the interest paid on a top-up loan if the loan is used for home renovation or repairs. This is similar to the tax benefits available for Home Loans. So borrowers save money on tax deductions.
To Wrap Up
Top-up loans can be a lifesaver when you have underestimated the expenses and applied for a lower loan amount. Getting a top-up on the existing loan is quick and easy if you have a good repayment track record. There are several other benefits, including lower interest rates, flexible repayment options, and tax savings. Some of the main benefits include the following:
- Preapproved Top-up
- No processing Fee
- Minimal Documentation
- Fixed and Floating options are available
- Loan disbursement in two days
Apply for an instant top-up loan today!
