According to a report, growth in the personal loan segment in India is being driven primarily by salaried individuals. By July-end 2020, salaried borrowers of such loans increased by around 13.3% y-o-y.
- The total personal loan outstanding to salaried individuals was Rs.7.22 trillion by the end of July 2020.
- The overall loan portfolio was worth around Rs.25.31 trillion at this time.
This immense popularity of personal loans is due to the growing demand for unsecured credit along with a change in consumer behaviour. The need for quick and affordable loans has also grown to significant popularity, incentivising individuals to avail top-up loan on their personal credits.
Understanding the basics of a top-up advance
A top-up loan refers to a form of specialised credit, which is available above and beyond the existing loan value. For instance, consider that a borrower has availed a personal loan of Rs.15 lakh. However, while servicing dues, he/she has urgent need of additional funds. In that scenario, looking for a fresh loan can be challenging since lenders may refuse to sanction additional credit to one already servicing a loan.
A top-up advance can act as an instant personal loan in such an instance, enabling a borrower to acquire the additional cash without resorting to a fresh loan application.
Keep in mind that top-up loans are available from the same lender with whom one is currently repaying his/her existing dues. Although they are not treated as separate loans, a borrower would still need to service both the top-up and personal credit simultaneously. Thus, one needs to figure out some smart ways to manage his/her top-up and personal loan at the same time.
Benefits of a top-up loan
Some of the top benefits that make a top-up advance popular as well as feasible are –
1. Additional principal
A top-up advance enables a borrower to acquire additional funds, available as separate funding from his/her personal loan principal. Suppose the maximum available personal loan amount is Rs.25 lakh. However, a borrower requires Rs.40 lakh to fulfil an emergency financing need. In that case, he/she can borrow Rs.25 lakh as a personal loan and the remaining Rs.15 lakh as a top-up credit.
Keep in mind that some NBFCs allow an individual to borrow additional funding of up to Rs.25 lakh as top-up advance, a value available over and above the personal loan.
2. No documentation necessary
Since an individual availing a top-up credit acquires funds from his/her current lending institution, he/she does not need to complete any additional documentation to avail these forms of credit.
Thus, getting to know about the important documents required while applying for a personal loan should ensure suitable top-up financing later in the advance’s tenure. All a borrower would need to do is back up the financing request with suitable income documents.
3. Easy-to-meet eligibility criteria
Personal loan eligibility criteria and top-up loan requirements are similar since both are unsecured forms of credit and the latter is availed as an extension to an existing personal loan. The only additional necessity is that borrowers must have completed at least 12 of their personal loan EMI payments* before applying for a top-up credit.
However, the most important benefit is that top-up loans are not seen as a different loan by credit agencies. Thus, opting for such credit on top of one’s existing personal loan will not affect his/her credit ratings adversely. Therefore, the next time you wonder what to pick between a top up loan vs personal, keep this factor in mind.
Further, lenders like Bajaj Finserv bring this financing option at customers’ fingertips with an online application process.
The lending institution also brings pre-approved personal loan offers to ensure a simplified and less time-consuming application process. These offers are available on business loans, personal loans, credit cards, and others. You can check your pre-approved offer by providing a few important details.
To prevent complications during repayment of both the loans together, plan your finances accordingly with a suitable repayment strategy. To do so efficiently, you can take the help of a loan EMI calculator available online.
