Loan top-up: All about this financial option
What's the story
In India, a loan top-up is a facility that allows borrowers to increase their existing loan amount without having to apply for a new loan. This is especially useful for those who need extra funds for emergencies or planned expenses. The top-up amount is usually added to the outstanding principal and repaid in installments along with the original loan EMI. Here's all you need to know about this financial option.
#1
Understanding loan top-up benefits
A loan top-up comes with several benefits, like lower interest rates compared to personal loans. Since it is linked to your existing loan, the interest rate is often lower than standalone loans. Further, it also saves you from the hassle of documentation as most lenders require minimal paperwork. This makes the process quicker and more convenient for borrowers in need of immediate funds.
#2
Eligibility criteria for loan top-ups
To be eligible for a loan top-up in India, borrowers must meet certain criteria. They should have a good repayment history and maintain a healthy credit score. Most lenders also require that the existing loan be at least six months old before applying for a top-up. Further, the borrower's income should be sufficient to cover the increased EMI amount.
#3
Interest rates and charges explained
Interest rates on loan top-ups are generally lower than those on personal loans, usually ranging between 8% and 12% per annum, depending on the lender and borrower's profile. However, it's important to check if any processing fees or other charges apply when availing this facility. These costs can vary from one lender to another but are usually nominal compared to other financing options.
Tip 1
How to apply for a loan top-up
Applying for a loan top-up is simple and can be done online or offline through your lender's branch office. Start by checking your eligibility based on existing loan terms and credit score. Gather required documents like identity proof, address proof, income statements, and current loan details before submitting your application online or visiting a branch office with these documents ready.