A top-up loan is a type of loan that a bank offers over and above the loan amount applied under a primary loan category such as a home loan, personal loan, etc. Customers can only apply if they have an existing relationship with the bank through a loan and a stipulated time has passed since the complete disbursement of the original loan amount. If a bank does not offer a top-up loan, a customer can transfer their loan to another bank and apply for a top-up loan there instead.
Low interest rates and nominal processing charges make the top-up loan preferable compared to a personal loan. Since the customer already has a relationship with the bank, the documentation required to apply for a top-up loan is also minimal. A top-up loan is a better alternative for customers who are already repaying a loan as compared to a personal loan.
However, every applicant does not get the approval for a top-up loan from the bank. The bank factors a customer’s repayment ability, other financial commitments such as loans, etc. to approve the application for a top-up loan.