There are a number of benefits associated with the top-up loan. But before getting started with the advantages, let us get to know the loan itself in some detail.
A top-up loan is considered a loan that is provided over the existing loan. When you need additional funds in an emergency situation, you can obtain additional loans in the form of a top-up loan. But this should only be availed in dire situations. As already one loan has been obtained and having a 2nd would increase the interest amount sumptuously.
Aspects of top-up loan:
- Eligibility: Not everyone is the ideal candidate to be awarded a second loan in the form of a top-up loan. Banks conduct a comprehensive background check, and if found suitable, they sanction the loan by charging some processing fees. These checks generally consist of financial statements, outstanding bills, previous loan payment records, etc.
- Period: The period of the repayment of the loan varies from one bank to another. Generally, it is given for the same period as the previous loan.
- Rate: The rate of interest, in this case, is very comparable and similar to the ones charged in the case of the personal loan; these rates are a bit higher than other loan interest rates.
- Use: Since the interest charged is of the level of personal loan. So, the use is also similar, one can use it according to their wish.
Advantages associated with the mentioned loan:
- Easier to obtain: The process of obtaining any kind of loan is rigorous. A number of docs are to be submitted along with id proofs, address proofs, income statements, tax returns, etc. But while obtaining a top-up loan, these processes are waived or shortened to an extent as the applicant has already issued a loan from the same bank.
- Life saver: This type of loan works as an excellent life saver in harsh financial crunch situations. As the loan application process takes less time due to the already existing loan documents, one can expect the loan to be sanctioned sooner than usual as it does not require applications to be submitted from the starting end. Medical emergencies, personal financial emergencies are some cases where this particular kind of loan is availed extensively.
- Economically feasible: Availing this kind of loan also makes sense financially, though the interest rates are much lesser here and almost comparable to the personal loan interest rates, but still, it is much more feasible than obtaining loans from informal sources. As they, too, will be the ones issuing the loan very quickly, but the cases of fraudulent interest rates are very prevalent there. They charge exorbitantly high interest rates even for a meagre period of time.
- Tenure Period: The payback in this kind of loan is much easier than usually anticipated. The tenure period of loan is usually somewhere around 1 to 5 years.
- Multi usage: One can use this kind of loan as they see fit as there is no constraint of using the money for the obtained purpose. One can use it for various purposes, some of which include funding children’s education, renovation of the house, buying appliances, furnishing the new home, etc. One is independent to use the money as per their wish in any way that they desire through this kind of loan.
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The facts and details enlisted above enlighten us on various aspects of a top-up loan like its eligibility criteria, how someone can avail of this kind of loan, etc. Additionally, we also got to know a number of advantages associated with this kind of loan and several other similar aspects. So, if you are required additional funds, then it is one of the best options you can avail.