Top-up Loans Versus Personal Loans: Which to choose?


In times of financial crisis, people seek out loans to either fund a financial emergency, tide through a rough patch, or as a simple and affordable tool to spread out the cost of an expense. The loan amount can be used for various purposes that include medical emergency, child’s education, vacations, wedding expenses, buying expensive items, business, paying off debts, home renovations, and many more.

Funding emergency or monetary necessity are some of the unavoidable situations that generally trap most people because of the uncertainty and lack of knowledge about Which loan type they should go for? Which one is best for them?  Home top-up loan or personal loan?

The two simple ways to get quick financial assistance are either availing a personal loan or a top-up loan.

Top-up Loan Vs Personal Loan


A top-up loan is a secured loan facility provided by the banks, Housing Finance Companies(HFCs), and other financial institutions that allow you to borrow a certain amount of money over and above your ongoing personal loan whereas, a Personal loan is an unsecured and unspecified loan amount a person borrows from a bank, or any other financial institution, to meet their personal needs.


You can utilize a home top-up loan for purpose of renovation or construction of your house or to meet your expenses like funding for children’s education etc. However, the top-up loan amount cannot be utilised for speculative purposes whereas, One can use a personal loan to finance anything from home renovations to planning a vacation and even meet unexpected medical expenses, personal loans are also useful when it comes to investing in a business.


The top-up loan is not available to everyone who has availed a personal loan from a bank whereas, anyone with a fixed and regular source of income is eligible to apply for a personal loan.

Interest rate

The Interest rates charged on top-up loans are slightly higher than what one pays for his/her home loans. But this is very cheap as compared to rates on the personal loan hence leads to reduce interest burden usually have 8.90% onwards.

Interest rates can range depending upon one’s credit history, tenure, income occupation, etc. The rates are generally fixed and not floating rate, usually have 10.75% onwards.

Loan tenure and loan amount

The top-up loan is generally taken up to 30% of the loan amount for the period of up to 30 years or remaining tenure whereas, a Personal loan is taken up to ₹40 lakh for 1-5 years.

Tax benefits

Once a top-up loan is disbursed, the loan amount can be used for various reasons like Home renovations or expanding a home, one can avail tax benefits up to a certain amount. However, one can avail of a personal loan for several reasons, but the tax benefits are not entitled to choosing a personal loan.


Both categories of loans have their respective benefits, and one’s choice will surely depend upon one’s needs and goals.

 For example, even though personal loan interest rates are higher than that of top-up loans, the personal loan repayment tenure is shorter. So, would you go for paying a higher interest rate for a shorter duration or in a lower interest cost for a longer period?

So the final choice is yours……

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