Top-up loans, along with a personal loan, a credit card, and other loan choices, are a great method to receive unexpected funding. Having said that, experts advise that the first step is to grasp what top-up loans are.
Banks, housing finance firms, and other financial institutions offer top-up loans, which allow borrowers to borrow a specific amount of money in addition to their home loans. As a result, they are financing choices for borrowers who already have a loan with the lender, such as a home loan.
Borrowers are normally only eligible for a top-up loan in this situation if they have been paying their EMIs on time for at least a year and have not defaulted.
Gaurav Jalan, CEO, and Founder, mPokket said that a borrower’s track record of repayments is one of the primary determining elements on whether he or she could be qualified for a top-up loan. When a loan of this type is accepted, it is normally on the same terms as the original loan.
When faced with a financial emergency, most people will either take out a personal loan or liquidate assets such as gold and real estate to obtain funds. Experts believe that in some cases, a top-up loan on an existing house loan is a preferable option because they are readily available and come with a low interest rate.
The most significant advantage of a top-up loan is that the borrower is only required to complete minimal documents. Simply put, their existing loan EMIs will increase in proportion to the increased borrowing. A top-up loan eliminates the need for the borrower to apply for a new loan because it is approved based on the borrower’s existing loan with the lender. This streamlines the procedure and speeds up disbursement. As a result, a top-up loan could be regarded an immediate funding choice.
Jalan adds that this makes it a perfect option in case of an urgent need for money. Top-up loans are used in a similar way to the original loan, but with fewer restrictions.
A home loan, for example, can only be used for that specific purpose; however, because a top-up loan is tied to an existing home loan, the borrower is not obligated to use the money for refurbishment or house repair. So a top-up loan might be used for house repairs or furnishing, as well as larger needs like business expansion, kid education, medical emergencies, and weddings – top-up loans can be used for anything.
Jalan further stated that Top-up loans are a perfect alternative in case of unanticipated occurrences or whenever one requires a personal loan, a loan against their property, or even gold. It’s a more convenient and hassle-free solution in such situations.