Personal Loan

Is a Top-up Loan on a Personal Loan a Good Idea? 


Money borrowed for various miscellaneous purposes from money lenders is a personal loan. For example, you can use a personal loan for your dream wedding, home renovations, or consolidate debt. Moreover, different financial institutions like credit unions, banks, etc., offer personal loans at a lucrative rate. 

Personal loans satisfy unprecedented financial emergencies by giving access to instant cash. They are easy to avail, with minimum documentation. It does not require any guarantee. 

However, financial emergencies do not come announced. Hence, many borrowers need to learn how to arrange funds when they are already paying EMIs of existing personal loans. They do not have indemnity to get a secure loan. Such scenarios give them two options: a new personal loan or a Top-up Loan.

What is a Top-up Personal Loan?

A Top-up Loan refers to an additional loan you can avail of on your current personal loan. Banks or other financial institutions offer this facility to lenders with a stable loan repayment record. Borrowers can apply for a top-up loan either in the same bank or transfer the balance to another bank and avail of a top-up loan there. Moreover, even the interest rate of a Top-up loan is either the same or slightly higher or lower than the existing loan’s interest rate.

Eligibility For Top-up Loan

The eligibility criteria for a Top-up loan are very simple. Here are the points to know.

  • You must have an existing personal loan with the lender.
  • Your age must fall between 21 and 60 years.
  • You are eligible if you have repaid a specific part of your existing personal loan.
  • You must have a stable job with sufficient income.
  • You can club income from various sources to qualify for higher loan amounts.
  • Lenders usually consider borrowers with good credit scores and histories.

Points To Consider Before Opting For Top-up Personal Loan

The Top-up Personal loan has many benefits over a new loan. However, you must know everything before making an informed decision. So here is what you should know about a Top-up loan:

Your Power To Payback

You cannot change the loan terms while availing of a personal top-up loan. Hence, it increases your EMI burden. Therefore, before taking a top-up loan, you should ensure that your income has increased. You should compare it to your income while taking the existing personal loan. Such calculation will help you pay increased EMIs on time. Also, it will acknowledge the future financial burden. You may have to go through this if there is no increment in your income. 

Rate of Interest

The rate of Interest of a Top-up loan is the same as that of a regular personal loan. If you come across a lower rate in the market, opting for that offer is a more sensible decision. However, if you are not getting a better offer, you can always negotiate with the lender for an Interest rate. Besides, if the lender disagrees with the negotiation, opting for a new personal loan is a wiser option as it will reduce your monthly EMI obligations. 

Extra Charges

Top-up Personal loan lender requires you to pay an additional processing fee, documentation charges etc. The amount varies for different lenders. Hence, get the information of additional charges beforehand and calculate how expensive the loan gets with these additional charges. Such calculations will help you determine the affordability of a Top-up loan. Also, it will play an instrumental role in planning. You can plan to continue with the existing lender or opt for another one. 


A Top-up loan is an additional amount given to you on an existing personal loan. Hence, the term of the top-up loan is the same as the current loan tenure. Let us consider a scenario where you already have a personal loan of X amount for three years. After one year, some other financial requirements come up. Now, you decide to take a top-up loan. After taking the top-up loan, you will now have to pay the EMI for your personal plus top-up loan in the remaining two years. Thus, a top-up loan does not allow you to extend your loan tenure. However, you can refinish your personal loan and change the terms.

How is a Top-up Personal Loan Beneficial?

Taking a top-up personal loan is beneficial because of the following reasons.

  • The top-up personal loan interest rate is usually the same. Sometimes it’s 1% to 0.25% higher or lower than the current interest rate. 
  • The lender can waive processing fees.
  • You can negotiate the interest rate depending on your relationship with the bank.
  • You can get a top-up loan quickly and easily because the lender has already measured your repayment capacity. 
  • You are not required to submit extra documents if you take a loan from the same lender.
  • The top-up loan term will be the same as your current personal loan. Hence, you can enjoy longer loan tenure by opting for a top-up loan at the earliest.

How To Negotiate Top-up Loan Interest Rate

You can negotiate for a personal top-up loan interest rate if you have a solid repayment history and a good credit score. A good credit score results from a good repayment history. Hence, ensure paying your dues on time. You should maintain a credit score of 700 or more. With this, you can always benefit from a lower interest rate from your lender. 

Summing Up

A personal loan benefits only when you have a finance requirement. Using it just like that can leave you in debt. A top-up loan is an extra loan you can avail of on the existing personal loan. It is an add-on for customers with an ongoing relationship with the lender. It is usually given to those with good credit scores and repayment ability. Thus, the top-up loan is beneficial against a new loan as it provides a better interest rate and tenure.

Do you still need clarification on a top-up and a new personal loan? Then, take a bit of advice from experts at Piramal Finance. They will understand your requirement to lead you to a more beneficial solution.