Top-Up Loan over a New Personal/Home Loan? Here’s How It Might Work!

“Congratulations on finding your dream home! We heard that you took a personal loan but are now falling short of funds to make the final purchase. We have another personal loan for you.”

Imagine getting this kind of a call. Another personal loan? Can your budget accommodate it? Are there any alternatives?

Continuing the scenario from above, enter Top-up Loan, a loan booster that you can opt for as an existing borrower given it has a lower interest rate. Top-up loans are often considered a better option even by experts as the lender already has your information which makes the loan processing smoother. To add to it, the tenure of a top-up loan is longer which lowers the EMI.

Interest Rate Difference? What’s the Catch?

While it is said that top-up loans are a suitable option because of a lower interest rate, there is a catch to it. Only if you have a good credit Score can you get a top-up loan. Thus, to be eligible for a top-up loan, you need to meet the following criteria -

• You should have an existing personal or home loan.
• You should have paid a certain portion of the current home loan.
• You should have a stable salary and sufficient earnings.
• You should have a good credit score and strong credit history.

How Do Documentation and Other Processes Work?

When it comes to personal loans, patience is a virtue as the application process can often feel like a marathon. Your first time applying requires the bank to meticulously scrutinise your documents, examine your profile, and verify every detail. But hold on, because top-up loans are here to revolutionise the game.

Picture this: the bank already has your documents, and your details have been thoroughly verified. As a result, you can now prepare for the thrill of lightning-fast processing times! Top-up loans swoop in to save the day, slashing the wait time dramatically.

No more paperwork nightmares or endless queues. Most banks offer a seamless online experience through net banking, allowing you to effortlessly apply for a top-up loan. Brace yourself as within mere hours, the bank will disburse the requested amount directly into your account.

Revealing How Bank Calculates Your Top-up Loan Amount

The bank deftly calculates the top-up loan amount by factoring in the Equated Monthly Instalment (EMI) of your existing home/personal loan. They meticulously analyse the Fixed-Obligation-to-Income ratio (FOIR) for your top-up loan, simply by subtracting the instalments of all your current obligations.

Talking about the loan amount, do you need another collateral for a top-up loan?

Here's a thing: no secondary security is required for this top-up loan. The additional funds are seamlessly added on top of your primary home loan, eliminating the need for additional collateral. Rest assured, your valuable property documents remain securely in the hands of the lender, ensuring peace of mind while you unlock the financial possibilities that await you.

Planning to Get a Top-up Loan? Here’s All You Need to Remember!

While it is said that securing a top-up loan is a smooth process, a lot of effort on your end has to be made in terms of maintaining a high credit score, timely repaying the EMIs of the existing loan, ensuring that you have a stable income source, and so on.

Also, don’t forget to look out for hidden charges. Make sure that the loan remains an asset for you and does not turn into a liability.

Keep in mind, when considering a top-up personal loan, you must tread cautiously as it brings a surge in your EMI burden. The loan terms remain unchanged, leaving you with an amplified repayment responsibility. To effortlessly tackle these augmented EMIs, it's imperative that your income has undergone a noticeable boost since the inception of your initial personal loan.

Exercise caution and tread carefully — a single misstep in making timely payments or defaulting on credit agreements could send you spiralling down a treacherous path mounting debts.

Whether you're seeking a top-up or considering a concurrent loan, let the golden rule guide you: ensure that you glide through the repayments with effortless ease. Take a moment to evaluate your financial capacity, for it is the pillar that will safeguard your stability and prevent you from stumbling into the clutches of financial turmoil.

Written By: Tanvi Pathak

Policybazaar UAE – Helping you navigate the wilderness of the insurance world!