What is a topup loan and when should you consider it?
Say you have a solid relationship with your lender. You've maintained a healthy credit score and are always good for timely repayment. In such cases, you might be eligible for a topup loan.
Put simply, a topup loan is a financing option availed by a borrower over and above the existing loan amount. It is usually put towards purchases such as home loans.
The reason for the aforementioned conditions is due to the caution exercised by banks before offering a topup loan, in order to insulate themselves from any defaulting by the borrower.
What do I need to know about topup loan eligibility?
A topup loan is eligible to you only when you have taken a home loan already and have been repaying the amount on a steady basis for at least a year. Remember that a solid track record in repayment is one of the key determining factors behind whether you're considered for a topup loan or not.
What are the benefits of a topup loan?
Provided you meet the above criteria, a topup loan offers plenty of benefits such as convenient interest rates, affordability, flexibility, and a lot more.
When a topup loan gets approved, it is done on the same terms, conditions and interest as the original loan. However, based on how good of a relationship you have with your lender, as well as your eligibility and the lender's own policy, you could possibly get a different interest rate or tenure. You could possibly even get a waiver on a few changes.
Ease of eligibility
Given that you already have an existing relationship with your lender, there is no need for your creditworthiness to be reassessed. Your existing credit history will be the primary basis on which your eligibility will be decided upon.
A good avenue for emergency funding
Given that a topup loan doesn't require the application of a new loan, it significantly streamlines and speeds up the disbursal process. This makes it a viable option to turn to for meeting urgent requirements.
More affordable than many other finance sources
While the interest rate for a topup loan might still be around 1.5 to 2 per cent higher than a home loan, it's still lower than say, a personal loan or a loan against property.
A topup loan has a long repayment tenure, which lets you have a significantly relaxed repayment plan in place, as per your convenience. Of course, it will depend on the tenure of your existing home loan. But when you consider that a personal loan has a five-year tenure, a 15-20 year tenure of a topup loan still sounds far more appealing, doesn't it?
Use as per your needs
Another aspect of a topup loan that adds to its versatility and flexibility is that you can use it as per your needs. This is because there's no restriction on usage. So you can use the topup loan however you want, be it to pay for home expenses such as repairs or upgrades, purchase of a vehicle, pay for education or even take care of emergencies.
Personal loans and home loans are more suited to help you fulfil your long-term commitments. But for those occasions when you absolutely need to purchase something, an instant loan is the way to go.
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