When in financial need people look for loans, but because of lack of knowledge they don’t know which loan type they should go for? Which one is best for them? Home loan Top up or personal loan?
Financial emergency or monetary urgency are some of the unavoidable situations that generally trap most of us because of their uncertainty and unpredictability. To overcome these crunch situations, people tend to opt for a loan. However, not every individual is well aware of how to deal with these tough situations or how to pursue a lender in taking a loan. First time borrowers get easily perplexed as they haven’t taken any prior loan and do not have much information about it.
Most of us are well aware of personal loan but many of us do not know much about home loan top-up. Both of these are loan categories that makes easy for the customer to come out of their financial crisis. Whether it is personal loan or home loan top-up, the use of the loan amount remains the same. The loan amount can be used for various purposes that include medical emergency, child’s education, vacations, wedding expense, buying expensive items, business expansion, purchasing machinery, paying off debts and many more.
Both these loans have their specific features but now the question arises that: Which loan to choose between personal loan and home loan top-up?
To answer the question, we need to do a comparison check between these two loans for better understanding.
Comparison check between Personal Loan and Home Loan Top-Up
| Category | Personal Loan | Home Loan Top-Up |
| Loan Tenure | 1 year-5 years | Upto 30 years or remaining tenure |
| Interest Rate | 10.75% onwards | 8.90% onwards |
| Loan Amount | Up to Rs. 40 lakhs | Upto 30% of loan amount |
| Processing Fee | Min. 0.50% of the loan amount | Upto 1% of loan amount |
| Pre-closure charges | Min. 2%-5% | Nil |
| LTV (Loan-to-Value) Ratio | NA | Up to 85% of property value |
What is a Home Loan Top-up?
Home loan Top-up is an addition to your existing home loan. To avail top-up loan customer has to re-pay the existing home loan for at least one year or as mentioned in the loan agreement. The lender provides home loan top-up only if the borrower has provided collateral for the same. Approximately 75% of the loan amount is sanctioned over the provided property as collateral. This loan is not restricted to be used only for property related purposes and can be used to meet any financial requirement. Borrower can avail tax benefit on home loan top-up only, if the loan is used for your child’s education or home extension, renovation or improvement. There is no new documentation process to be followed if you want to avail top-up loan. Customers can not prepay existing home loan before clearing the home loan top-up.
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What is a Personal Loan?
As the name suggest, personal loan is a loan taken from any financial institution by an individual to meet his/her financial requirements. Personal loan is known as unsecured loan as no collateral is required. Personal loan is sanctioned to an individual on the basis of his/her repayment capacity, income, net monthly salary, credit/CIBIL score, employment history, occupation, etc. Interest rates offered on personal loans are relatively higher as compared to other loans as there is no collateral like gold or property.
Check & Compare: Which is the best bank to get a personal loan with low interest?
Feature’s comparison between Personal Loan and Home Loan Top-up
| Personal Loan | Home Loan Top-up |
| Lower Interest Rates | Higher Interest Rates |
| Lower Repayment Period | Higher repayment period |
| Unsecured Loan – No collateral required | Collateral already provided |
| Lengthy documentation | Less documentation |
| Quick approval | Requires checks before approval |
By now you shall be having a fair idea between these two loans and your decision of taking a loan of your choice must have been simplified. Customers who are already availing home loans shall be benefited if they opt for home loan top-up, as they enjoy lower EMIs (Equated Monthly Instalments), higher repayment tenure, low interest rates with least documentation. Personal loans are for those who are not availing any home loan and do not have any collateral to be given as security.
To avail loan of your choice you can simply visit paisabazaar.com, check & compare between all the available loan options and submit the loan application form online. Within sometime you will get a call from one of our expert advisors who shall discuss about your loan requirements and will suggest you the best loan deal you desire. Our expert advisor shall also guide you throughout the loan process from form submission uptil the loan amount is disbursed and has credited to your bank account.
For first time borrowers it’s highly recommended for them to thoroughly compare and then finalize on the loan deal to avoid any misconception or doubts. Perform in-depth research before opting for any loan as one small mistake can lead to their big financial losses. For existing home loan borrowers, it is important for them to keep a check on the exiting new offers and deals offered by their lender. They can also visit paisabazaar.com to apply for their new loan, as per their choice and requirements.
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1 Comment Comments
excellent article