Top-up Loan vs. Fresh Loan

Suresh. M is a 40-year old IT professional residing in Bengaluru. He has a mortgage of up to 60 Lakhs with HDFC bank for a duration that is 25 years. As of now, Suresh has made 48 EMIs with no default. The situation is that Suresh wants to remodel his home, which will cost him about four lakhs based on his estimation. Then Suresh isn’t in a position to pay this amount out of his savings account and decides to take out a personal loan of three lakhs from HDFC solely because the bank has a good relationship with the bank.

If Suresh contacts HDFC for a personal danmarks billigste lån, they recommend that he take out the top-up home loan instead of a brand new home loan.

A top-up loan can be described as a service offered by the bank to current customers with loan accounts. This option allows borrowers to receive additional funds in addition to their existing loans. However, the top-up loan is only available for the home loan or personal loans.

The benefits include :

• Instant funding
• There is no need to go through the steps.
• Low-interest.
• You have a reliable backup because you have a relationship with the lender.

Let’s get this clearer using the calculation and compare both alternatives.

• The interest rate for an existing home loan is 8.5 percent.
• The rate of interest for the new personal loan will be 10.35 percent.
• Home loan EMI – 56,366 per month
• EMI for the personal loan is 10,210
• If they decide to get the top-up loan instead of an individual loan, they can get it approved for 7.5 percent as the rates for home loans have been reduced.
• Therefore, it’s inevitable that Suresh can save money if he takes advantage of an additional home loan.

Similar to personal top-ups for loans. If you’re already in the process of paying an individual loan and you are in the mood to borrow another. In that situation, you have two options:

1. taking out a personal loan with a top-up or
2. is taking out a new personal loan.

A personal top-up loan is the same as an up-to-date home loan. It is made available by an existing lender to customers. What differentiates top-up and fresh loans is that both new and established lenders may offer new personal loans, while top-up loans can be provided to existing lenders.

If a customer has already paying for the EMI and is paying the EMI, it is best to choose the best option keeping the obligations to bear in mind and after calculating and comparing each of the choices.

But, when making a choice, you must think about your current situation while considering the future. What EMIs impact your financial situation, the total cost of loans, processing fees, etc.

The advantages of a top-up loan

• Documentation process simplified
• Quick and easy approval
• Low-interest rate
• Lower EMIs
• A hassle-free procedure.
• Possibility of longer durations

Important note: Like the other loans, a top-up is also subject to processing fees along with cheque-bounce fees, and additional charges apply. Therefore, it is crucial to decide after you’ve done the correct calculation and done your study. A Top-Up Loan also comes with tax benefits under section 80C and Section 24 of the Income Tax Act. Still, it’s vital to utilize borrowed money for home reconstruction/renovation or education purposes to avail of this. You may need to present evidence to be able to be eligible for these tax advantages.