Financial crises can strike at any time and without warning. You can get fast cash from personal loans to assist you in times of need. Due to the fact that it may be used with little documentation and doesn’t require collateral, it is highly beneficial in times of financial hardship.
Many borrowers are unsure of how to secure the cash if they are already making payments on an existing personal loan and do not have any collateral for a secured loan when a financial emergency arises. You have two choices in this situation: you can either apply for a new personal loan or choose a top-up personal loan.
An additional loan that can be obtained on an existing personal loan is known as a top-up personal loan. For borrowers who make timely payments on their personal loans, the lenders provide this opportunity. Either apply for a top-up loan through the same bank or transfer your balance to a different bank and apply for a top-up loan there. Top-up personal loans typically have interest rates that are the same as, slightly higher than, or slightly lower than those of the existing loan.
Things to consider when taking personal loan top-up
Although a Top-up Personal Loan has numerous advantages, it is important to be aware of the following in order to make an informed decision:
Interest rate
Top-up personal loans have interest rates that are comparable to those of standard personal loans. It makes sense to choose the offer if the rate is less than what is being provided in the market. If not, you should haggle over the personal loan interest rate with the lender. If the lender is unable to compromise, you might want to choose a new personal loan to lower your monthly EMI requirements. This will enable you to reduce your EMI and interest payments.
Hidden charges
When choosing a Top-up Personal Loan, your lender may charge you a processing fee, paperwork fee, or other fees. In order to determine whether you can afford the loan, you must find out from the lender in advance about all of these hidden fees. If the current lender is levying greater fees, it is inadvisable to stick with them.
Loan tenure
The loan tenure of a top-up loan is the same as the existing loan tenure because a top-up personal loan is merely an addition to an existing personal loan. For instance, if your current personal loan has a term of 5 years and you choose to take out a top-up loan after taking out the initial loan for 2 years, you will be required to pay back both the top-up loan and the balance of your personal loan within the personal loan’s term, or in three years. Keep in mind that the top-up loan does not allow you to prolong the loan term unless you choose to refinance your personal loan and change the loan parameters.
Your income
Your EMI load rises since you cannot modify the loan terms with a top-up personal loan. You must ensure that your income has grown since you took out the existing personal loan in order to punctually settle the increased EMIs. If your salary has not changed, it could put a strain on your finances.
Other loan options
Personal loans are more expensive than secured loans because they are unsecured. Therefore, it is advised to only use a personal loan of any form, such as a regular personal loan, top-up personal loan, personal loan refinance, etc., in an emergency situation where you have no other options and a pressing need for money. Taking out such expensive loans for indulgences or purchasing expensive stuff like electronics, cars, furniture, etc. is not a good idea.
To conclude
You can bargain with the lender on a personal loan top-up interest rate, processing fee, and other costs if you have a solid repayment history and a high credit score. However, it is important to evaluate your demands before choosing the option, and you should only use the loan in dangerous conditions. To make an informed choice, compare the terms of the top-up loan with those of other loan alternatives and carefully study the loan agreement.
