A personal loan is a multi-purpose loan that can be availed of for instant financial help for a variety of reasons like home renovation, wedding expenditures, medical emergencies, etc. However, you need to contact the lender to know about the personal loan eligibility criteria that you need to fulfil. Also, you need to provide the necessary documents and maintain a good CIBIL score.
Now, a top-up loan is the funding that you can receive from a lender if you are already a loan account holder there. Also, they check if you have paid the previous EMIs on time and you are not a defaulter. Now, when choosing between a fresh personal loan and a top-up loan for instant funds, the latter would prove to be a great option for you due to the following reasons.
Easy documentation process
As your lender already has all the required documents, the documentation process gets relatively simple. You only need to provide your current employment details, personal details, repayment record, and financial details. Also, you need to pay a small processing fee and you get the loan. However, if you try to get a fresh personal loan you need to go through the long and arduous application process again.
When you opt for a top-up loan, the top-up loan amount plus interest gets evenly distributed into the existing EMIs of your existing personal loan. Hence, you get more time to pay the loan. However, you decide to take a fresh personal loan, you’ll have to juggle the two loans and that can get stressful.
In the case of a top-up loan, as the lender already has the majority of the documents, the loan gets approved quickly and you don’t need to wait for long to get done with the application process. Whereas, in the case of a new personal loan, the process can take a lot more time due to verification of the documents and other official procedures.
Affordable interest rates
A top-up loan has an interest rate similar to the existing personal loan and hence, it proves to be much cheaper than a fresh personal loan. On the other hand, the personal loan interest rates for new loans have a high probability of being higher as you already have a running loan. This is because the amount of loans you take is inversely proportional to your credit score.
You don’t need to provide any collateral to the lender either for the fresh personal loan or a top-up loan. This is because a personal loan is an unsecured loan which means the loan or the top-up is provided based on your credit-worthiness and doesn’t require collateral.
In addition to all of that, you should consider your current and future financial capacities to make a better decision as selecting the right loan for your purpose is essential. After thorough research, you can contact your finance company or lender to help you better in this matter.