Life has a lot of unknowns. It's not uncommon for you to need to take out another loan shortly after taking out the first. Few people realize, however, that a financial emergency may arise, forcing you to borrow money again. When you're looking for a second loan, a traditional mindset can betray you. New-age banks, on the other hand, don't appear to believe this. As a result, borrowers can now obtain a personal loan top-up.
What is a top-up loan?
A top-up loan is a loan that can be used to supplement existing personal loans. If you have been making regular loan repayments on an existing personal loan, you may be eligible for a top-up loan. By transferring your amount to another bank, you can apply for a top-up personal loan with the same or a different bank. The interest rate for top-up loans is typically 0.25–1% greater than the existing loan rate.
Factors to Consider while Taking a Top-Up Loans
When taking out any type of loan, you must always make a reasonable decision based on your current financial circumstances and future plans. Here are some essential characteristics to assist you evaluate a top-up loan against a new personal loan to help you through the decision-making process.
Personal loans have identical interest rates as top-up loans. You should take advantage of a lower rate than what is available on the open market. Otherwise, you'll have to work out a deal with your current lender to get the rate to where you want it. If this does not work out, you might take out a new personal loan to reduce your EMI payments.
Top-up loans are only good for as long as the original personal loan is in good standing. As a result, if you apply for a top-up loan two years after the commencement of your existing personal loan, which is for five years, the entire loan (top-up + existing personal loan) will last three years. This may result in a further increase in your EMI responsibility, as well as a change in your daily financial routine. You can calculate EMI using a personal loan EMI calculator.
Who can avail?
When seeking a second mortgage, having a personal loan can be advantageous. Borrowers who have already taken out a loan with a certain financial institution are eligible for a personal loan top-up. For such consumers, a top-up personal loan is a wonderful option to get out of debt. Because it's a personal loan, lenders aren't concerned with the reason for the borrowing.