What is Top Up Loan? Benefits, Eligibility & Procedure
Published on : February 24, 2020

What is a Top Up Loan ?

A top-up loan is the loan one takes over and above an already existing loan. The existing loan could either be a home loan, a personal loan, or any other form of loan. Timely payments on the existing loan favor your chances of getting a top-up loan.

It is an add-on facility offered by lenders to their existing customers.

When Should you Opt for a Top-Up Loan?

Top-up loans come in handy under the following circumstances:

  • When you already have an existing personal loan and need additional funds. You should have paid up a stipulated number of EMIs on your current loan to be eligible for additional fund.
  • You want to meet your monetary requirements without having to go through the hassle of fresh documentation.
  • When you require immediate funds either for personal use, business use, or miscellaneous expenses.
  • Top-up loans are also preferred when a person is looking for debt consolidation instead of managing multiple loans.


What is the Eligibility Criterion for Obtaining a Top-Up Loan?

The eligibility criteria may vary from lender to lender. There are two major factors you should keep in mind before obtaining a top-up loan:

  • You must have an existing on-going personal loan with the lender that you are approaching for your top-up loan. If the vendor does not have a top-up loan facility, you must transfer your personal loan with the bank or a financial institute that provides top-up loan facility and then apply for it.
  • Before approving your request for a top-up loan, the lender will check your repayment records. They will verify your credit history and CIBIL scores to make sure that you are financially stable.


What are the Benefits of a Top-Up Loan?

Quick Processing and Disbursal

Since you already have an existing personal loan with the bank or the financial institute, they may process your application faster. The loan amount is disbursed as soon as the verification is complete. Thus, these loans are perfect for emergencies.

Minimal documentation

The documentation may vary from lender to lender. Some may not require any documents for availing a top-up loan as the process has already been done during the disbursal of the primary loan. However, other lenders may require you to submit minimal documents for loan processing

Interest rates or Charges

Top-up loans may carry a lower rate of interest or lower processing charges than new loans depending on the lender.

Loan Tenure

The tenure of the top-up loan cannot exceed the tenure of the primary loan. Thus, you have an option of choosing a tenure equivalent to your existing one or a shorter one.

No collateral needed

Since a top-up personal loan is an unsecured form of loan, you do not require to pledge any security or collateral against the loan.

Consolidated EMIs

Some banks or financial institute allow you to consolidate your EMIs. This means you can combine the primary loan and the top-up loan amount and pay it in a single EMI. This allows you to manage your payments better as you do not have to remember separate payment dates.

No restriction on usage

You can use the top-up loan amount for any purpose like, a medical emergency, business expansion, wedding, or a holiday.


Top-up Loan vs. New Loan : Which One Should I Opt For ?

Though both serve the same purpose and have no restriction on how you use the amount, there are certain differences between the two.

Procedure of Application

To apply for a instant personal loan, you need to submit or upload the required documents. The lender verifies the submitted documents and checks your eligibility. Once they establish your creditworthiness, your loan amount is disbursed.

The verification and disbursal process for a top-up loan is comparatively faster as you already hold a primary personal loan with the lender. For a top-up loan, you may be asked to submit minimal documents, depending on the lender’s requirements. The eligibility is established by looking at your repayment history and credit scores. As soon as the lender verifies this information, the loan is disbursed.


Rate of interest & Other charges

For a new loan, the rate of interest is comparatively higher. It varies for each individual borrower and lender. A person with a lower credit score may get his/her loan at a higher interest rate than someone with a good credit score.

For top-up loans, the rate of interest might be lower than that of the existing personal loan as the applicant already has a relationship with the lender. Also, most lenders offer discounts on the processing fees on Top-up loans as compared to a new loan.



Comparatively fewer documents are needed for a top-up loan than those needed for a fresh loan. The scrutiny process is also higher for a new loan application.


Collateral or security

Both types of loan are unsecured forms of debt and do not require you to pledge any collateral or security. But in case of a new loan, if the lender is not convinced of the financial stability of the applicant, they may ask the applicant to provide a collateral or a guarantor.


In Conclusion

Both, a new personal loan, and a top-up loan are suited for emergency situations. They do not carry any restriction on its usage, so people prefer a top up loan when they are looking for immediate cash. Though these types of loans are easily available with minimal documentation, one must understand their need and use them wisely.

Make sure you have the means to pay off your loans in a timely manner while ensuring that your savings are also growing at a steady rate. This lets you enjoy the best of both worlds and be in charge of your financial health.



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