As per a CRIF High Mark report, the number of personal loan disbursals in India rose by 140% in FY20 and comprised ticket-size of less than Rs.50,000. The same report also revealed the following –
- Borrowers with an annual income of less than Rs.3 lakh increased to 86% in March 2020 from 53% in March 2018.
- The volume of the personal loan of less than Rs.50,000 has grown a whopping 162% year-on-year, till March 2020.
These statistics are an indicator of the rising demand for personal loans in India. The reasons behind this can be attributed to several factors like easy accessibility to funding, increased consumption, etc.
Individuals can also opt for a top-up personal loan that allows them to avail an additional amount on top of their existing credits borrowed. One can choose to apply for this fund in case of any financial emergency or when the primary loan amount does not suffice to meet additional expenses that may arise in due course.
Thus, before applying, existing borrowers should know about the features it accompanies.
Features of a top-up loan
Existing borrowers can avail a top-up loan which is an unsecured credit like a personal loan. Some of its features are mentioned below –
- This top-up amount does not have any end-use restrictions and can be channelled towards meeting any number of expenses. Borrowers can utilise the funds for home renovation, expansion, funding education and several other purposes.
- The tenure of this additional fund generally aligns with that of the principal loan amount. However, this factor may vary from lender to lender. Lenders also consider the age of borrowers, income and other relevant parameters before disbursing the amount. Individuals without a regular income source can follow some useful tips on how to get a loan without a job.
- While some lenders keep the rate of interest the same for the top-up and existing loan amount, others charge a little higher than that.
- Some lenders offer this facility only to those who transfer their existing loan amount to them. For example, if Rajiv already is servicing a pre-existing personal loan against a fixed interest rate, he can choose to transfer the outstanding amount to a new lender against a floating rate to save substantially on repayments. Doing so will also make him eligible to avail a top-up amount.
Since a top-up loan can only be availed on existing credit, its processing takes minimal time. Besides, it also offers numerous other benefits that borrowers can consider.
Benefits of a top-up loan
Following are some of the most notable advantages that borrowers can leverage from this fund.
- Although the interest rate of a top-up is slightly higher than the primary loan, it is still lower than credit cards, car loan, etc. Individuals should also know about the factors affecting personal loan interest to avail the most competitive rates.
- Since lenders offer this facility to existing borrowers, individuals do not have to provide any further documentation and use it as an instant personal loan.
- If you are using the top-up amount for home repairing, construction, etc. You can also enjoy tax benefits on personal loan of up to Rs.2 lakh on interest payment under Section 24(b) of the ITA, 1961.
- Individuals can avail a top-up of up to Rs.25 lakh from a financial institution like Bajaj Finserv. Besides the high amount, they also extend pre-approved offers that simplify the credit availing process. These offers are also available on various financial products like personal loans, business loans, credit cards, etc. You can check your pre-approved offer by entering some essential credentials like name and contact number.
However, to reap all these benefits, individuals need to fulfil specific eligibility requirements.
Top-up personal loan eligibility criteria
Not everyone who is servicing a personal loan is eligible for a top-up.
- As per the CRIF report, personal loan outstanding reached Rs.5.07 trillion in August 2020.
This led lenders to stress on client selection and risk assessment before sanctioning the amount. As a result, individuals now need to satisfy a few stringent eligibility requirements before they can avail the credits.
- Borrowers must have an excellent repayment history without any missed EMI payment.
- The loan applicant should have a CIBIL score of 750 and above to be eligible for the funds. In this regard, you have to know how CIBIL score is important for personal lending.
Thus, while a personal loan proves to be a great financial tool to mitigate a crisis, a top-up loan helps maximise the benefits further.