In times of a financial crunch, people seek out loans to either fund a financial emergency, tide through a rough patch or as an easy and affordable tool to spread out the cost of an expense. You could use a loan if you are purchasing an expensive gadget, getting renovations done at home or even to fund a vacation.

The two easiest ways to get quick financial assistance is either availing a personal loan or a top up loan. Here is a quick guide that will help you understand the features of a personal loan and a top up loan, as well as the difference between the two. This will help you make an informed choice on the one that suits your needs best.

  Personal Loan Top Up Loan
Type Personal loans are unsecured loans that can be availed from any bank or NBFC. A top up loan is a secured loan that can be availed from your home loan provider.
Availability Can be availed at any time from any financial institution. Can only be availed if you have an existing home loan from a housing finance company.
Collateral There is no need for collateral. Your house/property acts as a collateral.
Tenure Most personal loans are offered for 1 to 5 years. The maximum tenure of a top up loan is 30 years or the remaining tenure of the home loan.
Interest Rates 10.99% and above. Same as the home loan starting from 8.9%.
Loan Amount Up to Rs 75 lakh. Up to 30% of the existing disbursed loan.
Documentation KYC proof, income proof and credit score. No additional documentation required.
Processing Fee In some cases, the processing fee can be waived off or range between 0.5% to 1% of the loan amount. The processing fee may be waived off depending on the relationship with the institution or for special promotions. Or else, it could be up to 1% of the loan value.
Foreclosure charges Could be none or vary between 2% to 5%. Usually, no foreclosure charges applicable.
Approvals Instant approvals and quick disbursals. May take some time due to checks and risk assessment.
Tax benefit None Same as a home loan.

Both categories of loans have their respective benefits, and your choice will depend on your needs and goals. For example, even though interest rates on a personal loan are higher than that of a top up loan, the personal loan repayment tenure is shorter. So, would you want to pay a higher interest rate for a shorter duration or incur a lower interest cost for a longer time?

It is always recommended to check on the specifics of a loan so you have complete clarity and can make the most of the benefits being offered.

Whatever your financing needs, Tata Capital has a solution for you. Tata Capital is among the premier financial institutions in India operating under the trusted banner of Tata Group with over 100 branches across 70 locations. You can apply for personal loan as well as a top up loan if you have a home loan with Tata Capital.

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