Any kind of loan is taken primarily to fulfill one’s financial objectives. Let’s say you have assessed your goals and on that basis, have taken out a personal loan. In time, you find that your financial goals have grown or changed and you need an additional loan amount to meet these goals. At this juncture, you will have two options: 1. Apply for a new personal loan. 2. Apply for a top-up loan on your pre-existing loan. You can apply for either one of these plans by filling out a personal loan application online. 

The question is, which should you choose? The answer lies in a few factors that can help you evaluate the best way forward. In some instances, applying for a top-up loan instead of a new personal loan would be the better option. What is a top-up loan? A top-up loan is an additional loan added to your pre-existing personal loan. Put simply, instead of applying for a new loan, you can acquire the funds you need by modifying your current loan. 

When To Opt for A Top-Up Loan 

Like in a personal loan, your rationale for opting between a top-up loan or a personal loan should be based on the EMI amount, interest rate, and tenure period. If the interest rate on the top-up loan is lower than on a new personal loan, a top-up loan would be the way to go. If the interest rate on the top-up loan is higher than the interest rate for the new personal loan, then taking out a new personal loan might be the best option. 

Adding a top-up loan does not change the tenure period of your current personal loan. So, if the EMI you are paying is currently high, adding a top-up loan can significantly increase it. In this scenario, it might be wiser to apply for a new personal loan with a longer tenure for a lower and more affordable EMI. However, if you expect your financial income to increase in the short term, then applying for a top-up loan can allow you to clear the debt in a shorter period. 

To apply for a top-up loan, you need a strong credit score and a good past performance on monthly payments. If you perform well in these two categories, your top-up loan is all but assured. 

Further Benefits of Top-Up Loan

There are many benefits to a top-up loan in terms of applying for and managing this additional debt. These are: 

  • Faster Processing and Disbursal: Since you have already successfully applied for a personal loan, your personal documents and financial assessment have already been carried out by the lender. Therefore, applying for a top-up loan is faster and more convenient than applying for a new personal loan. 
  • Flexibility: You can secure a personal top-up loan off of a home loan or car loan as well. This means that you can consider using a top-up loan regardless of the kind of personal loan you have. Since there are no restrictions on how you can spend the funds received from a top-up loan, you are free to use it to achieve your financial goals. A top-up loan is more appropriate for emergencies since the loan is disbursed faster.
  • Consolidated EMI: Under a top-up loan, you can consolidate the EMI of the two loans into one payment. Consolidating your EMI payments allows for easier management of finances as you bring all your debt under one umbrella. 
  • No Collateral Is Required: In some cases, taking out a second personal loan can lead to a lender attaching some collateral on the loan. However, in a top-up loan, you do not have to pledge any security or collateral against the loan. 

To sum up, in conclusion, what is a top-up loan? A top-up loan is an additional loan you can acquire on any current personal loan presentDeciding between a second personal loan or a top-up loan depends on certain circumstances. If you are receiving a low-interest rate on the top-up loan, taking it would be wise. However, if a shorter tenure period drives the EMI cost too high, opting for a new personal loan would be beneficial. 

If you decide that a top-up loan fits your requirement, you can access further benefits. These include a faster processing time, less documentation, flexibility, and not needing to provide collateral. Whether you are interested in applying for a top-up loan or a personal loan, you can do either by filling out a personal loan application online.

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