FINANCE

Tempted by a top up loan offer? Here’s why it may not be a bright idea

Top-up loans are available to those who have an ongoing personal loan with the lender.

Once a borrower has successfully repaid a significant portion of their existing home loan, they become eligible for a top-up loan.

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Taking a top-up loan means that your debt burden increases.

A top-up loan, as the name suggests, allows borrowers who already have an ongoing loan to access additional funds on top of their existing loan amount. This additional amount is added to the existing loan principal, extending the total borrowed amount without requiring a separate loan application process. These top-ups are available mostly for personal loans and for home loans.

Top- up personal loans

Several financial institutions offer a top-up on personal loans to existing borrowers who have a good repayment track record. “This allows such borrowers to avail additional funds on top of their existing personal loan,” says Adhil Shetty, CEO, BankBazaar, a financial marketplace.

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“The eligibility criteria for a top-up loan may vary between lenders and typically depend on factors such as your repayment history, credit score, and the lender’s policies,” says Adhil Shetty, CEO, BankBazaar. Some lenders may also have specific criteria such as completing a certain number of EMIs before a top-up is offered.

Typically, top-up loans are available to those who have an ongoing personal loan with the lender. In many cases, the need for fresh application, documentation, and even processing fee may be waived off.

“Once this becomes available the borrowers can anytime choose to avail the extra credit without needing any extra documentation. This adds a lot of convenience and also incentivises the borrower to maintain a good repayment history as they can avail a top-up loan again after completing the given repayment duration,” says Ameet Venkeshwar, chief business officer, LoanTap, a personal loan provider.

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“Once this becomes available the borrowers can anytime choose to avail the extra credit without needing any extra documentation. This adds a lot of convenience and also incentivises the borrower to maintain a good repayment history as they can avail a top-up loan again after completing the given repayment duration,” says Ameet Venkeshwar, chief business officer, LoanTap, a personal loan provider.

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