Can You Borrow More Money From Existing Loan? What Is Top-up Loan, Check Benefits

Top-up loans come with their repayment schedules, typically added to the existing loan tenure. (Representative image)

In need of extra cash? A loan top-up could be the answer. It lets you borrow more on top of your existing home or personal loan, often with faster approvals and lower interest rates. Let’s explore the types and key points to consider!

What Is Loan Top-Up?

A loan top-up refers to the facility provided by banks and financial institutions to existing borrowers to borrow additional funds on top of their existing loan amount. This option is usually available for various types of loans such as home loans, personal loans and car loans.

Here are some key details about loan top-ups in India:

• Purpose: Loan top-ups are typically used by borrowers for purposes such as home renovation, funding education, meeting medical expenses, or any other financial requirement.
• Eligibility: To be eligible for a loan top-up, borrowers must have a good repayment track record on their existing loan. Lenders assess the borrower’s repayment history, credit score, income stability, and other factors before approving a top-up loan.
• Loan Amount: The maximum loan amount available for top-up depends on various factors such as the outstanding balance of the existing loan, the borrower’s repayment capacity, and the lender’s policy. Generally, lenders offer top-up loans up to a certain percentage of the original loan amount.
• Interest Rate: The interest rates for loan top-ups are usually slightly higher than the interest rates on the original loan. However, these rates are typically lower than personal loan interest rates since the loan is secured against the existing collateral (e.g., property for a home loan).
• Repayment: Top-up loans come with their repayment schedules, typically added to the existing loan tenure. Borrowers have the option to repay the top-up loan along with their existing loan EMIs over the remaining loan tenure or opt for a shorter tenure by increasing the EMI amount.

Types of Loan Top-Ups:

• Home Loan Top-Up: This is the most common type of loan top-up in India. Borrowers with an existing home loan can apply for a top-up to meet their additional financial requirements without the need for additional documentation related to property valuation.
• Personal Loan Top-Up: Some lenders offer top-ups on existing personal loans. Borrowers can avail additional funds on their loan, subject to meeting the lender’s eligibility criteria.
• Car Loan Top-Up: For individuals who have taken a car loan, some lenders offer the option of a top-up loan to finance additional expenses related to their vehicle or other financial needs.

Eligibility:

• Existing loan with a good repayment history
• Minimum credit score (often 750+). However, this may differ according to the lender/bank
• Stable income and debt-to-income ratio within limits
• Specific eligibility criteria may vary by lender.

It’s important for borrowers to carefully consider the terms and conditions, including the interest rate, tenure, and repayment schedule, before availing a loan top-up to ensure it fits their financial needs and repayment capacity.

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