Aside from lower interest rates than unsecured loans such as personal loans, a home loan also comes with tax advantages, which encourages buyers to take out a loan. Many young people today already have a mortgage on their names. But what if you're in a financial bind and you've already taken out a home loan that you're trying to pay off? Many expenses, such as college fees and emergency medical bills, accumulate throughout the course of one's life. In such situations, most of us opt to take out a personal loan. Stop, reconsider, and consider top-up loans before making that decision.
What is a Personal Loan?
Personal loans are a smart way to manage your money, especially during this recession, when job losses and income reductions are typical. A personal loan is an unsecured loan that can be used to pay for medical expenses, house repairs, vacations, weddings, and other financial emergencies. Several banks and lending organisations offer a collateral-free loan with low interest rates to satisfy your various needs.
What is a Top-up Loan?
If you already have a house loan, your lender may allow you to borrow additional funds in addition to your current loan. A "Top-up Loan" is a type of supplementary loan offered by your bank or lender. A lender would not issue a top-up loan to every consumer with a home loan, but only to those who have made timely payments.
The difference between top-up loan and Personal loan,
When it comes to interest rates, when compared to personal loans, top-up loans have a lower interest rate. We all know that personal loans have a high interest rate because they are unsecured loans. Top-up loans, on the other hand, use your home as collateral. Because a top-up loan is only available to existing home loan clients and the bank has all of the requisite documentation, it is quite safe. As a result, if you pick an add-on loan over a personal loan, you can benefit from lower interest rates. You can get tax benefits up to a particular amount once a top-up loan is approved if you utilise the money for pre-defined activities like home renovations or extending your home. You may not be allowed to do so if you take out a personal loan to renovate your home. Before taking out a personal loan, check with your bank to see whether you qualify for any tax benefits. A top-up loan's repayment period is usually variable. When opposed to personal loans, top-up loans usually have a longer term. Most banks will offer you a top-up loan for the remaining term on your existing house loan. As a result, it's a fantastic alternative to personal loans.
When you apply for a personal loan, the processing time is usually quite lengthy. This is because you are applying for a loan for the first time, and the bank must check your paperwork, evaluate your profile, and verify your information. When it comes to top-up loans, however, the bank already has your documents and has confirmed your information. This cuts down on processing time.
When you apply for a top-up loan, the bank or the lender will already have all of the essential documents because you provided them when you applied for a house loan in the first place. As a result, if you pick an add-on loan, the documentation process is simple and quick. A personal loan, on the other hand, will require you to fill out numerous papers and submit numerous documents.
Top-up loans are an excellent alternative to personal loans, as can be seen. So, before you make a decision, go to your bank and speak with someone to analyse the benefits and drawbacks of both forms of loans.
