Which option should you choose between a top-up loan or a new loan? Both have their own advantages and disadvantages. Let’s understand the difference between a top-up loan and a new loan in simple language.
Do you know well about top up loans?
Whenever a person who has already taken a loan needs money again, in such a situation you will have two options. The first is that you can take a new loan. Or if you want, you can take a top up loan. First of all, let’s understand what a top up loan is and how it is taken, what are its benefits.
What is a top up loan?
You get additional loan amount on this loan from the bank or financial institution from which you have already taken a loan. If you do not pay the EMI on time, then you will not be able to take advantage of this facility. It is seen by the financial institutions whether the lender has repaid the loan within a certain limit or not. Only after which they will be given this facility. Let’s assume that you have taken a loan of Rs 5,00,000 from the bank to build a house. But later you need another Rs 50000 for some work like painting or furniture. So for this, a top up loan can be taken on the existing loan from the bank from which you have already taken a loan.
Difference between top up loan and new loan
- Documents required: If you apply for a top up loan, then you will not need to give new documents for this because you will get a new loan on the old running loan. Apart from this, if you take a new loan, then for this you will need to forgive all the documents, due to which the process may get delayed.
- Delay in process: The process of top up loan is easier than a new loan and it is available in less time. Because the bank has already completed all the KYC checks and verifications.
- Choice of bank: You can take a new loan from any financial institution of any bank. But top up loan can be taken only from the institution from where you have taken your first loan. However, the bank from where you have already taken a loan has your track record, so top up loan is easily available.
- Bank will give top up loan only to existing customers: Banks can also give top up loan only to existing customers. That is, if there is a sudden need of money, you will get financial assistance without any wait.
- Loan can be obtained at concessional interest rates: Personal loan is given by the bank at standard interest rates. The record of your EMI payment is tracked by the bank. If you go to take a new personal loan, then you will have to write a new contract, as well as it will also take more time than a top up loan. Therefore, if you have already taken a loan, then it will be better for you to take a top up loan than taking a new loan.
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