Personal Loan

Top-up Loans vs Personal Loans


When people are in a financial bind, they start thinking about how to get cash quickly. But people can’t always borrow money from friends and other people they know. A few of the most common types of formal credit are personal loans, loans against collateral, top-up loans, and other forms of secured credit. People can get a fast loan as a top-up or a personal loan. Anyone can apply if they have a steady source of income and a good credit history and score. Let’s look at the differences between these two kinds of credit so people can make smart choices.

What is a Top-Up Loan?

A top-up loan is an extra amount of money added to an existing home loan. This option is available to people with a home loan from a bank or other financial institution. It is an extra service that some banks offer to customers who have paid back their loans on time for a certain period. People who use a top-up loan don’t have to pay processing fees. These top-up loans are a great way to get around any financial problems, no matter why they are needed.

Top-Up Loan Eligibility

The criteria to get a top-up loan are the same as those for a home loan:

  • The applicant’s bank statement for the past year shouldn’t show more than one EMI bounce.
  • If a payment for an EMI bounces, the full amount must be paid by the next payment date.
  • Home loan EMIs must be paid in full for at least six months.

General criteria

  • To apply, individuals must be at least 21 and no more than 65.
  • Applicant must be a resident of India.
  • Applicants must have a good CIBIL/credit score. It indicates that they are a better credit risk and will have to pay back less.

Characteristics of Top-up Loans

  • Loan Amount: The top-up loans depend on how much the old loan is worth. Typically, the top-up value is capped at a certain proportion of the existing loan. Approval may also depend on other things, like how much money the person makes.
  • Instant Payout: The process of top-up loans is quick and easy. There isn’t much paperwork to fill out, and people get the money right away.
  • No Security Required: The benefit of a top-up loan does not need any collateral. Applying for such a large extra top-up loan does not require security.
  • Low-interest rates: A top-up loan’s interest rate might be the same or slightly greater than the original loan’s rate. This varies from lender to lender.
  • Simple and quick: People can get this loan online. They can apply for it from their homes or offices, and the money is sent to them quickly and without any extra steps.

What is Personal Loan? 

A personal loan is a loan that a person takes from a bank to meet their financial needs. People don’t have to put up anything as security for a personal loan, so it’s called an “unsecured loan.” People get personal loans based on their income, credit score, CIBIL score, etc.  Personal loans usually have higher interest rates because they aren’t backed by security.

Personal Loan Eligibility

The criteria for getting a personal loan in India differ for each person: 

  • One must have a good CIBIL score over 700.
  • To live in a city, the person must have a monthly income of at least INR 25,000. 
  • The person has to be between 21 and 60 years old. 
  • To get a personal loan, the person must have worked for at least three years before.

Characteristics of Personal Loans

  • Flexibility: Personal loans give people freedom. Unlike loans for cars or homes, this loan can be used for anything. So, anyone can borrow money for different needs. It’s a simple way to fix someone’s money problem right away.
  • Fast approval: Pre-approval moves quickly. To get a fast personal loan, people have to be eligible. Having a good credit score is helpful. Depending on the lender, the loan usually takes 24–72 hours to be paid out. It’s great for difficult times. Existing bank customers may be able to get quick approval online.
  • Little paperwork: Personal loans need little paperwork. This makes it faster. If anyone needs help, the customer service department can help. Loan agents can help people with paperwork.
  • No collateral needed: Personal loans need no collateral. People’s money is in good hands. Personal loans with no collateral are the best way to get cash quickly. 
  • Tax breaks: When people take a personal loan to build or fix up their home, they may get a tax break. Section 24B lets them get a benefit of Rs 2 lakh. People must track how much money they use for the above things.

Top-up Loans vs Personal Loans

FactorsTop-up LoansPersonal Loans
TypeTop-up loans are secured loans. People can get these loans from home loan providers.Personal loans are unsecured loans. Anyone can get it from any bank or non-bank financial company (NBFC).
Ease of getting a loanBanks only give top-up loans to those with previous home loans.People can take this loan anytime from any bank & financial firm.
CollateralNeededNot needed
TenureA top-up loan‘s tenure is up to 30 years or existing home loans.Most personal loans are available for 1 to 5 years.
Processing feeDepending on the relationship with the bank, people can get a free processing fee. Sometimes, it could be up to 1% of the loan’s principal.Processing fees can be free or range from 0.5% to 1% of the loan balance.
Loan amount30% of the original loanUp to 75 lakhs
DocumentationNo extra paperwork KYC  documentation, credit history, income proof.
ApprovalsChecks and figuring out the risks may take some time.Easy and fast approvals
Foreclosure chargesNo foreclosure chargeForeclosure charge up to 5%
UsagePeople can use a top-up loan for anything from home repairs and additions to paying for their kid’s college tuition and other personal expenses. People can’t use the extra money from the loan to gamble.Personal loans can be used for many things, like making improvements, travelling, getting an education, or even getting medical care in an emergency.A personal loan can be very helpful when investing in a business, fixing or replacing a car, saving for a down payment on a house, etc.


Choosing between a top-up and a personal loan can be challenging. People choose based on the lender they go through and the terms offered by top-up and personal loan providers. The interest rate for both types of loans varies, depending on the lender. The loan size, current income, and credit history may influence top-up loan eligibility as well as personal loans.

Visit Piramal Finance to learn more about various types of loans and explore different products and services.