In the modern era of ever-changing trends and unabating inflation, sometimes availing home loan may just not be enough to make your home the place of your dreams. To turn such dreams into reality and reach your personal milestones, you may opt for either a Personal Loan or a Home Loan Top-Up. Let’s dive deep into the details to find out which one would be better.
What is Home Loan Top-up?
Home Loan Top-Up is an additional loan amount that you can avail over and above your existing home loan. The maximum loan amount and the tenure available under the top-up loan product vary from lender to lender. Customers have the flexibility to avail top-up loan from the existing lender or from a different lender through balance transfer.
What is Personal Loan?
It is a short to medium term unsecured loan which is generally disbursed in a short time with minimal paperwork required. Personal Loan does not require any collateral/security for approval. The maximum loan amount available under a personal loan depends on the borrower’s risk profile and CIBIL score.
Comparing Personal Loan and Home Loan Top-Up
Mentioned below is the detailed comparison on the basis of different parameters.
- Interest Rate: Home Loan Top-Up is available at lower interest rates as compared to Personal Loan. The table below shows the detailed comparison of interest rates offered by the leading providers.
|Bank||Home Loan Top Up Interest Rate||Personal Loan Interest Rate|
|SBI||8.60% onwards||11.50% onwards|
|HDFC Bank||8.95% onwards||10.75% onwards|
|ICICI Bank||8.60% onwards||11.25% onwards|
|Axis Bank||8.55% onwards||12% onwards|
- Loan Tenure: The maximum loan tenure or the repayment period of Home Loan Top-Up extends up to 20 years, whereas, for a Personal loan, it is limited to up to 5 years.
- Loan Amount: The maximum loan amount available under Home Loan Top-Up may go up to Rs. 50 lakh (depends on the bank’s policy), whereas, under Personal loan, the maximum loan amount depends on the risk profile of the borrower and CIBIL score.
- Purpose of Use: Both Personal Loan and Home Loan Top-Up can be used for various purposes such as covering expenses related to marriage, education, business, home renovation/construction, and much more.
- Processing Time: Both Personal Loan and Home Loan Top-Up have a low processing time due to minimal or no requirement of paperwork. However, a Personal Loan may be approved and disbursed in a shorter time than Home Loan Top-Up.
Conundrum of Selection: Making an Informed Decision
Considering the key parameters, Home Loan Top-Up surely does have an edge over Personal Loan but one has to keep following things in mind before availing it.
- Only Home Loan customers who have paid timely EMIs for at least 6-12 months can avail Home Loan Top-Up.
- Home Loan Top-Up can only be availed from the same lender from which a customer has taken a home loan. Alternatively, the lender can be changed through balance transfer facility.
- A customer can not prepay his/her Home Loan before settling/clearing the Top-Up Loan.
- Home Loan Top-Up processing time may go up to a week for disbursal, depending on the lender.
The above-mentioned facts do not hold true for Personal Loan, as it majorly depends on the borrower’s risk profile for loan approval and eligibility. Therefore, it is ideal to exercise the best option basis your situation and the need.