Taking a loan is the easiest way to tackle urgent liquidity needs. There are many types of loans available in the market to bolster your cash flow. A top-up loan is one such option that can conveniently provide you with extra funds. You can use the top-up funds for any purpose such as settling a more expensive debt, buying property, or renovating your home. In this article, we will take a look at various aspects of personal loan top-up.
What Is A Top-Up Loan?
A top-loan is the additional amount that you can borrow through your existing loans such as home loan, personal loan, car loan etc. The loan amount you can borrow depends on the existing loan balance.
Who Can Avail This Loan
A personal loan top-up can be availed by borrowers over and above their running personal loan. The bank and a non-Banking Financial Company (NBFC) will offer you a top-loan only if you have made regular repayments on your existing loan. It may also check with you about the purpose of a top-up personal loan.
Tenure, Interest Rate And Processing Fees
The maximum tenure for a top-up personal loan is usually 5 years. However, it also depends on your outstanding amount and repayment capacity. Interest rates on personal loans are around the 10% mark. The processing charges vary from bank to bank. For a personal loan top-up, the processing fees is 1-3% of the loan amount.
How Top Up Loan Is Beneficial
A top-up loan helps conveniently arrange funds without paperwork. Since it is given on your existing loan, you do not have to pledge any collateral. The documentation process is simple and the loan is disbursed quickly. The repayment facility for a top-up personal loan is flexible and it can easily be paid through EMIs.
Depending on your use, your personal loan top-up can also provide you with tax benefits. You can claim tax deductions for availing a personal loan to buy or renovate your house, to fund higher education expenses, business expansion etc. In such a case, the deduction is given as per the applied tax norms under each head. For example, a loan used to buy a property can provide you deductions under Section 24 and Section 80C of the I-T Act.
Things To Remember Before Going For A Top-Up Loan
– You can seek a top-up loan from your existing lender or you can choose to apply for a balance transfer loan with a top-up loan. This simply means that you transfer your loan to a new bank offering a lower interest rate and avail a top-up loan on your existing loan. Do remember your new lender will check your repayment record before granting you a personal loan.
– Like other loans, you can foreclose your top-up loan. But it would be wise to check the terms and conditions before doing so.