Synopsis: In today’s blog, we discuss at length the features of top-up loans and the benefits of availing them. We will also explain how you can apply for a top-up loan through the Protium app. 

When financial emergencies come knocking at the door, oftentimes, taking out loans may be the only viable option. But things can become complicated if you already have considerable servicing obligations on a previous loan. In such instances, top-up loans can help you get by, provided you meet your existing lender’s conditions. 

So, what are top-up loans, and how can you avail of them? 

What are top-up loans? 

As the name suggests, a top-up loan is an amount taken over and above a pre-existing loan. In other words, top-up loans are a type of financing opportunity available to borrowers from their current lenders to meet their immediate needs. 

These loans preclude a pre-existing relationship between a lender and a borrower. However, if you come across a lender offering lower interest rates, you can opt for balance transfer to the new lender and thereafter apply for a top-up loan on the transferred balance. 

What makes top-up loans an ideal choice is that you get access to funds almost instantly since your lender already has all the KYC documentation in hand to process your application. 

Which loans can you top-up? 

Going by the discourse, it might feel like top-up loans are available only on business loans, but that is not the case. Indeed, these loans can be availed of on a range of loan types, including personal loans, education loans, and business loans. 

Ultimately, the sanction of a top-up loan will depend on whether your lender offers such a facility. Moreover, the terms for such a loan will be similar to the existing terms on the underlying loans. 

What are the features of top-up loans? 

Since top-up loans are an add-on to your existing loans, they are sanctioned at comparable terms. To illustrate, if you are topping up a business loan, then the new disbursal will also be secured in nature, and if the underlying loan is a business loan, then the top-up loan will also be unsecured in nature. 

1. Nature of the loan 

A top-up loan will be secured if the existing loan is backed by collateral, as is the case with, loan against property, business loans and auto loans. For other loans, including personal loans, a top-up will be unsecured as it comes without a pledge. 

2. No end-use restriction 

Top-up loans provide businesses with the flexibility to use the funds as per their requirements without any end-use restrictions. They can be used for various purposes such as purchasing new equipment, expanding inventory, marketing campaigns, or hiring new employees.  

3. Loan tenure 

As top-up loans are a sort of booster loan on an underlying loan, their tenure will last only for the remaining tenure of the pre-existing loan. For instance, if you have taken on a business loan with a 30-year tenure and decide to top it up after 10 years, the tenure for the business loan top-up will be 20 years only, with no space for an extension. 

4. Interest rates 

Generally, top-up loans are extended at comparable interest rates, with some charging a markup ranging between 0.25% and 1%. Moreover, the final interest rate levy will also be based on your credit repayment history, credit scores, nature of employment, and present relationship with the lender. 

What are the benefits of applying for top-up loans? 

Some of the key benefits of availing of top-up loans are as follows: 

1. Quick disbursal 

Top-up loans involve shorter processing times as the lender is already familiar with your situation and has all the required documentation, making them an optimal choice for scenarios where you require funds urgently. 

2. Easier debt management 

Top-up loans are advantageous for those managing multiple parallel loans at the same time. This is because instead of juggling several EMIs, you can make do with a single EMI payment, making it easier to stay on top of your debt and finance management. 

3. Competitive interest rates 

Top-up loans are generally priced similarly to your pre-existing loans. However, topping up a business loan is even more beneficial as the rates are lower than personal loans. Additionally, if the market interest rates have gone down over time, some lenders may allow for the repricing of your remaining principal and the additional loan amount at the lower interest rate. 

4. Lower processing charges 

As the lender has already once ascertained your eligibility and conducted KYC, a top-up loan will entail lower processing and documentation fees. 

Who can apply for a top-up loan? 

The eligibility criteria for a top-up loan varies across lenders. However, some of the common eligibility conditions are listed below. 

• You should have an outstanding loan and a pre-established relationship with a lender. 

• You should have a strong repayment record, which includes not having missed or delayed any of your past installments. 

• You should have already paid off a certain proportion of your outstanding loan. Generally, lenders demand 12 EMI payments before considering your top-up loan request. 

• You must maintain a decent credit score; having a CIBIL score of 750 or above is a plus. 

• You should showcase sufficient repayment capacity. Lenders will evaluate whether your current income levels are adequate to pay off your current debt obligations, including credit card dues and the top-up loan amount. 

How can you avail a loan through the Protium app? 

Now, in addition to applying for a loan on our website or through our DSAs, you can avail of a top-up loan through the Protium App. The process is fairly easy and is stated as follows: 

Download the app and login: To apply for a top-up loan, first download the Protium app from the Google Play Store. Follow it up by filling in your account’s credentials, as created at the time of applying for your existing loan. 

Make an application: After logging in, fill in your details of the business and current financial position as prompted by the app in the top-up loan application. You may also be asked to upload additional documents at this stage. 

Receive the amount within minutes: After receiving your application, the app will inform you whether the loan has been approved. The funds will be released directly into your bank account if your application is accepted. 

Accordingly, a new loan account will be generated reflecting the additional amount sanctioned along with the details of the corresponding EMI payments. 

The key takeaway 

Top-up loans are an excellent choice to access funds quickly, provided you meet your lender’s eligibility conditions. However, one must carefully assess their financial position and repayment capacity before applying for a top-up loan, as it can increase your debt burden.