Top Up or a New Personal Loan- What to Choose?

Updated on: 27 Jul 2023 // 17 min read // Home Loans // Personal Loans
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There are a lot of funding options if you need money in an emergency. Depending on the requirement and situation you can choose an ideal loan product. To name a few, you can opt for a secured loan on your fixed deposit, shares, etc; or request for a Top Up on your existing Car Loan or Home Loan or Apply for a Personal Loan Instantly Online.

However, the decision to choose the ideal loan product is easier said than done for most of us. Let’s compare two of the most commonly chosen quick loan options- Personal Loan and Home Loan Top Up and find out how to choose the best option among the two.

Personal Loans – Important Characteristics

  • Easy to get when you satisfy the eligibility criteria stipulated by the banks
  • No need of providing any collateral
  • Simple documentation process
  • Maximum loan tenure is 60 months
  • No obligation to disclose the end use of funds

Personal Loans- Limitations

  • High rate of interest
  • Stringent eligibility norms
  • Need to have a high credit score in the range of above 700

Top-Up Home Loans – Characteristics and Features

  • Banks sanction Top-Up Home Loans if you satisfy the income criteria
  • Maximum loan tenure is more than the Personal Loan tenure. You can extend it to coincide with your original Home Loan.
  • No need to disclose the end use of funds to the bank.
  • Lower rate of interest as compared to the Personal Loans
  • Not necessary to have a credit score as high as 700
  • As you are an existing borrower, the bank knows your credit history, and you would do away from the initial verification process.

Top-Up Home Loan- Limitations

  • The quantum of loan depends on the value of the security available with the bank.
  • The approval process can take some time because of procedures like valuation, an extension of equitable mortgage, and so on.

Top Up Home Loan

Which is better between Personal Loan and Home Loan Top Up?

  • Urgent need for funds:

When you need money in an emergency, a fresh Personal Loan is the best option available to you. The approval process is fast. Usually, you get the funds in your account within 72 hours. It is not the case with the Top-Up Home Loans. The banks have to follow a set procedure. The valuation of the property is essential to ensure the coverage of both the Home Loan and the Top-Up Home Loan. There are other formalities like an extension of a mortgage that can take time.

  • Short-term requirement:

Personal Loans are better when you have short-term needs. If you have a higher requirement like marriage expenses, educational expenses, medical emergencies, and so on, the Home Loan Top-Up is a preferred choice. You can mobilise more funds with an extended repayment schedule.

  • The rate of interest:

The Home Loan Top-Up is better than a fresh Personal Loan when you consider the rate of interest. The rate of interest on a Personal Loan can be as high as 20% per annum whereas the Home Loan top-up interest rates compare favourably with the regular Home Loan product.

  • EMI factor:

The Home Loan Top-Up product has an extended repayment period. Therefore, the EMI (Equated Monthly Instalment) component is lower as compared to the Personal Loan. It leaves you with a higher disposable income on your hands.

  • Eligibility norms:

The lower EMI on the Home Loan Top-Up product ensures you have higher eligibility subject to the value of the property available after considering the requirement for the Home Loan. Secondly, you need not have a credit score in the range of 700 or above to Avail a Home Loan Top-Up. Banks know your credit history because you have a Home Loan with them.

  • Documentation formalities:

The documentation formalities in a Personal Loan are minimal whereas it is not so in the case of the Home Loan top-up facility.

  • The Requirement of Guarantor:

Usually, Personal Loans require a guarantor. It is not the case with a Home Loan top-up facility.

  • Restriction of options:

When you opt for a Home Loan top-up facility, you have to approach the bank where you maintain the Home Loan account. You do not have any other choice. You can transfer your Home Loan to another bank and take a top-up. However, that is a lengthy and expensive procedure. At the same time, you have all the leading banks such as PNB Bank offering attractive Top-Up Home Loan offers. On the other hand, you have a variety of options for Availing a Personal Loan. You can choose your bank or NBFC (Non-Banking Financial Company) from a large pool of resources.

Both Personal Loans and Top-ups are equally beneficial. Hence evaluate your needs thoroughly, and opt for the one that is more close to meeting your needs.


Also Read: Personal Loan or Home Loan Top Up: Which One is Better for You?


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