Top-up personal loan is an additional amount that you can borrow on an existing personal loan after you have completed a specified number of EMI payments. Similar to a personal loan, a top-up personal loan also features flexible end-use for various personal purposes such as wedding expenses, vacation expenses, medical emergencies, home renovation and more. Key benefits of opting for a top-up loan over a new personal loan may include minimal or no documentation while the interest rate offered remains the same as the originally approved personal loan.
Features of a Top-up Personal Loan
Given below are a few key features of top-up personal loans:
- Available only on an existing personal loan: You can avail a top-up personal loan only if you have an existing personal loan. Typically you need to have a clean payment track record and need to have completed a specified number of EMI payments for the current loan in order to be eligible.
- Loan amount: The maximum loan amount offered under the top-up loan category varies from one lender to another. However, most lenders do not approve top-up loans for amounts exceeding the amount of the original loan.
- Attractive interest rates: Banks and financial institutions typically offer top-up loans at same interest rate as the originally approved personal loan. However, as personal loan interest rates tend to vary from one applicant to another, the same holds true for a personal loan top-up.
- Quick processing and disbursal: Since a top-up loan is offered to borrowers who have already availed a personal loan from the lender, they have already undergone checks by the lender, they can get approved for a top-up loan much faster as compared to applying for a new loan.
- Flexible repayment tenure: You can avail a top-up on your personal loan for a tenure ranging between 12 to 60 months depending upon the outstanding tenure of your existing loan.
- Requires no collateral/security: No collateral or security is required to avail a top-up on your personal loan.
- Flexible end use: You can avail a top-up on your outstanding personal loan to pay for various personal financial expenditures, similar to a personal loan.
Interest rates for Personal Loan Top Up
Top up loan interest rates vary from one lender to another. They also vary based on the applicant’s profile such as his/her credit score, quantum of loan sanctioned, loan tenure, nature of employment, etc. Usually however, top-up personal loan interest rate is the same as your existing/outstanding personal loan interest rate, subject to prevailing market conditions. Top up personal loan interest rates of some leading banks and NBFCs in the country are given below:
|Provider Name||Interest Rate|
|ICICI Bank||11.25% p.a. onwards|
|State Bank of India||9.60% onwards|
|HDFC Bank||10.75% onwards|
|IDFC First Bank||10.75% onwards|
|Bank of Baroda||11.40% onwards|
|Kotak Mahindra Bank||10.75% onwards|
|Axis Bank||12% onwards|
The following eligibility criteria must be taken into consideration when applying for a top-up personal loan:
- You can avail a top-up personal loan only if you have an outstanding personal loan (existing relationship) with the lender.
- A top-up loan can be availed only after a certain stipulated time has passed- after you have repaid a certain portion of your loan
- You must have a clean repayment track record and there should be no overdue EMIs/ missed EMI payments.
- You should also have a stable job and income as they play a key role in determining your loan repayment ability.
- You should have a good credit / CIBIL score as it points towards higher credit worthiness and a lower repayment burden.
Minimal or no documentation is required to avail a top-up loan since you already have an existing personal loan (relationship) with the lender. However, the documentation requirement may vary from one lender to another. Here is a list of some common documents that may be required to avail a top-up loan:
- Identity proof: Aadhaar card/ Passport/ PAN card/ voter ID card/ driving license, etc.
- Address proof: Rent agreement/ utility bills/ passport, etc.
- Income proof:
- Last 3 months’ bank statements
- Last 3 months’ salary slips (For salaried applicants)
- Passport size photographs
Fees & Other Charges
Some key fees and charges associated with personal loan top-up are given below:
|Processing fee||0% – 6% of the loan amount|
|Part-Payment Charges||As per loan agreement|
|Foreclosure Charges||Up to 7% of the principal outstanding|
How to Apply for Top Loan
You can apply for a Personal Loan Top Up via any of the following means given below:
- If you have an active personal loan and if your lender offers the option to avail a top-up loan, you can check your eligibility and apply for one either through the lender’s website or by visiting the nearest branch office.
- In case your lender does not offer a top-up loan, you can transfer your existing loan to a new lender through a balance transfer and apply for a top-up loan with the new lender. You can also opt for a balance transfer in case a new lender offers a better rate of interest or longer repayment tenure on the top-up loan.
Benefits of Top-up Loans
Most people who have already availed a loan usually consider applying for a top-up loan instead of going for a separate loan to meet their new/additional financial needs. Some of the major benefits of a top-up loan are discussed here.
- Reduce Interest Burden: Borrowers can choose to avail a top-up loan on their existing personal loans and use it to pay off high interest debt such as credit card dues. This can help them reduce their debt burden and consolidate their debt to help easier repayment.
- Minimal Documentation: Typically no additional documentation is required to apply for a top-up loan in case of most lenders. This is mainly because the borrower has an existing relationship with the lender and the lender also knows about the credit and loan repayment history of the borrower. However, this documentation requirement may vary from lender to lender.
- Quick Processing: Since the borrower and the lender have an existing relationship because of the original loan, the lender processes the application for a top-up loan faster than a personal loan. The loan amount disbursement is, therefore, faster as well. This can help the borrower get access to funds from the lender comparatively faster and hence use the money to meet his/her immediate financial needs.
- Attractive Interest Rate: Most lenders offer top-up loans at the same interest rate as the original personal loan. This is also one of the main reasons why borrowers prefer to go for a top-up loan if they already have an existing loan.
- No Security/Collateral Required: In case of most lenders, borrowers are not required to provide any security or collateral to avail a top-up personal loan. They may not need a guarantor either. This can considerably reduce the amount of time taken to apply for a top-up loan as compared to a new loan application.
- Consolidated EMI: Many banks and financial institutions offering top-up loans allow borrowers to repay their primary as well as top-up loan using a consolidated Equated Monthly Installment (EMI). This can reduce the burden of making separate payments every month. It will also reduce the chances of missing loan EMI payments that can impact your credit score.
- Longer Tenure: If you avail a top-up loan, the tenure depends on the outstanding balance, your repayment capacity as well as the loan amount you are applying for. The loan tenure can be longer than that of the outstanding personal loan, which is why many people prefer a top-up loan. However, the tenure of a top-up loan cannot exceed the outstanding tenure of the original loan.
- Available for Balance Transfer: Some lenders offer a top-up loan on balance transfer as well. If you have already availed a home or personal loan from a lender but the lender does not offer a top-up loan, you can transfer your loan to another lender. This can help you deal with your new financial requirements easily.
Q1. What is the maximum top-up loan amount that I can avail?
The maximum top-up loan amount varies from one lender to another. However, lenders usually allow a borrower to apply for a top-up loan only up to the loan amount sanctioned under the primary loan availed by the borrower.
Q2. What is the maximum tenure for a top-up loan?
There is no specified tenure for a top-up loan. It depends on the borrower’s profile, repayment history, etc. Often, a top-up loan can be sanctioned for a longer tenure than the tenure remaining for the existing personal loan. However, the tenure of the top-up loan cannot be longer than the outstanding tenure of the original loan.
Q3. My bank does not offer a top-up loan. Can I apply for a top-up loan from another bank?
Yes, you can. If you already have a loan with a bank but they do not offer the top-up loan facility, you can choose another bank that offers the top-up loan and use their balance transfer facility to transfer the loan. You can then easily avail a top-up loan. Many lenders run offers and discounts on these loans to make borrowers opt for a balance transfer. You might end up saving a lot if you choose the right bank to avail the top-up loan.
Q4. Can I apply for a top-up loan if I have already availed three loans?
It is essential to have at least one loan from a lender to avail a top-up loan from them. Also, too many loans running at the same time can considerably reduce your credibility and credit score. You can still apply for the top-up loan and let the lender decide if you have the repayment capacity to avail it. Some people like to take a top-up loan to pay off all but one of their loans. This lowers the interest they pay back for their loans and also improves their credit score.
Q6. Can I avail any tax benefits if I get a top-up loan?
If you apply for a top-up loan to purchase or construct a house, you can avail tax benefit under Section 80C. If you apply to renovate, repair, extend or alter a house after the issuance of completion certificate or after it has been occupied or rented, you can get tax benefit under Section 24. However, if you have applied for a top-up loan to purchase a vehicle, go on a vacation, pay medical bills, etc., you are not eligible for any tax benefits.
Q7. Should I opt for a personal loan or top-up loan to meet some urgent financial needs?
A top-up loan often comes at a lower interest rate, requires minimal documentation and has a quick processing time as compared to a new personal loan. In case you have an existing loan from a lender, you can apply for a top-up loan from the same lender to meet your urgent financial needs instead of going for a new personal loan.