Top up on Home Loan vs Personal Loan – A Comparison to Determine the Better Choice for Loans

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Top up on Home Loan vs Personal Loan - A Comparison to Determine the Better Choice for Loans 1

Whenever you are in a financial crisis or need additional financial support for a short-term, a loan can help you fulfil all your obligations. If you already have a home loan, a top-up loan can be used to meet such requirements. However, personal loan is also one of the options that you could check out before taking a final call.

Before you make your choice, learn about top-up home loans, personal loans, and the difference between them, which would in turnhelp you take a wiser decision.

What is a top-up home loan?

When you already have a home loan, you can ask for an additional loan over and above that loan from your lender. This loan is called a top-up loan; a ‘top-up’ or an addition to your ongoing home loan. However, to avail a top-up loan, it is essential to have a good financial record. Lenders provide top-up loans only to those borrowers who have satisfactory payment records. So, if you have paid all your EMIs on time, you can get a top-up loan. While the home loan is aimed at a specific purpose that is purchasing the home, the top-up home loan is not tied to any end use. You can use the funds from this loan for any purpose, like meeting a financial emergency or repaying other high-interest loans.

What is a personal loan?

A personal loan is an unsecured loan that you can avail from the lender to fulfil your various financial needs. There is no pre-defined end-use for a personal loan, which is why the lender would never ask you the reason for taking a personal loan. Also, you need not submit any collateral for a personal loan.

What should you opt for? Top-up home loan vs personal loan; a comparison.

BasisTop up home loanPersonal loan
Loan amountThe amount of the top-up home loan would depend on the loan to value ratio of your collateral property. If your existing home loan is already equal to 80-85% of your property value, you might not be able to take a high-value top-up home loanIf you fulfill all the eligibility criteria, you can easily take a high value personal loan.
Interest rateThe interest rate of top-up home loan is low as compared to other loans.The unsecured nature of a personal loan makes it risky for the lender. This is why the interest rate of a personal loan is high.
DocumentationTaking a top-up home loan is easier in terms of documentation. It is because the lender already has your documents and they would not ask you to submit all your documents again.A personal loan is unsecured, due to which the lenders rely on your documents for all the information.
Loan tenureYou can get a longer tenure on your top-up home loan. The lender often allows the remaining tenure of your current home loan as the tenure for the top-up home loan as well.A personal loan is provided just for a maximum tenure of up to five to seven years

From the above comparison, it is clear that it is beneficial to opt for a top up home loan than a personal loan. However, the suitability would depend on individual conditions.

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