Top-Up Home Loan Vs Personal Loan

Any type of loan comes with a lot of responsibility and demands a solid financial commitment. This is due to the fact that anything you borrow is a debt that must be paid back, together with interest for the duration that you select. Therefore, you should exercise extreme caution and think carefully before applying for a loan. To finance people’s various needs, the majority of banks and non-banking finance organizations provide a variety of loans, including home loans, auto loans, personal loans, gold loans, and others. Some of these loans fall into the category of secured loans, while others fall into the category of unsecured loans.

Top-up Home Loan Vs Personal Loans

Different loans assist people to meet their needs and are used for various purposes. People frequently struggle to decide between a personal loan and a top-up home loan, though. A top-up home loan enables you to obtain additional funding for your home extension, renovation, or enhancement even though it is ideal to obtain a home loan while buying a new residence. Well, a personal loan can also be used to meet these needs. So, a personal loan is still another choice you can consider. Here is a short comparison between a top-up home loan and a personal loan, nevertheless, before you decide on one.

What are Personal Loans?

All of the biggest lending institutions provide personal loans, a type of unsecured borrowing. The loan can be applied for online from the convenience of one’s home or workplace. This loan’s interest rate is a little higher than average, so you should give it some thought before applying. There is no constraint on its end usage, though, thus it can be used for any individualized requirement.

What are Home Loan Top-Ups?

A top-up loan is an additional loan you receive from your home loan provider in addition to your current home loan. Because you already have an account with the lender, the loan only needs a minimal amount of documents.

You can renovate, expand, or carry out any other kind of construction or renovation work for your home with Top Up home loans. There are end-use limits, but the best part is that a top-up personal loan’s interest rate is the same as a home loan, making it handy for customers.

Now let’s compare the two loans in more detail:

Interest rate

Your current house loan will always be the subject of a top-up home loan. The benefit of choosing it is that you receive a new mortgage at the same interest rate as your current one. As a result, borrowing is easy and reasonable for customers. The fact that the lender views your home as collateral and does not require you to offer additional security is another crucial fact to understand in this situation. You also receive the loan at a lower cost. In contrast, the interest rate on a personal loan is usually high and often ranges from 10 to 16 percent. A personal loan, on the other hand, is fully secure and does not require any form of collateral or security. 

The tenure period

Home loans are typically available for a term of 20 to 30 years, but if you choose a top-up loan above that, you may be able to extend the loan term for an additional 5 to 7 years. However, the maximum loan term for a personal loan is five years. Therefore, top-up home loans give you more choices when it comes to repayment.

Loan disbursal time

The loan disbursal process for a top-up personal loan typically takes 4-5 days. This is so that your lender may update the paperwork that was completed when you applied for the house loan because it is a secured loan. A personal loan, however, is your finest choice if you are in need of immediate fund distribution due to an emergency. The majority of lenders currently offer instant personal loans, and thanks to internet processing, the funds are credited to your account within hours. requiring little documentation You can choose a personal loan if you require money right away. 

End-use limitations

There are no restrictions on how you can utilize a personal loan once you have applied for one. You are free to utilize the borrowed funds however you see fit. But there are some end-use limitations that come with obtaining a top-up house loan. Using money just for home building, renovation, extension, or painting falls under this category.

The most crucial distinction among all the variations is that only borrowers with active house loans are eligible for top-up loans. However, anyone can apply for a new personal loan and use it to fulfill their financial demands. Before choosing any of these loans, keep in mind variables like the EMI amount and the tax benefits if you already have a home loan and are experiencing financial difficulties. 

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