When someone takes a loan, situations might arise where the total capital is spent due to a valid reason. In such cases, you can go for a top-up. Several banks and other loan providing organizations deliver the top-up loans on a pre-existing loan structure. Mostly, top-up loans turn into a necessity for the people who are already in a home loan structure. The leading banks also provide a top-up loan on personal loans as well as mortgage loans.
The providers can only deliver top-up loans to the borrowers who maintain a good record when it comes to the balance repayments. Thus, you should have a strong foundation of having a good history regarding all the payments of your pre-existing loan.
Different loan providers follow different processes while they grant you top-up loans. Either, they will make a completely new structure of a top-up loan or merge it with the previous loan. For the first instance, you need to pay two different amounts of interest according to the loan structure. For the second case, you will need to pay the interest on a higher percentage.
Before you take the top-up loan, you need to know the leading pros and cons in detail. Given below are the prominent benefits and drawbacks of a top-up loan in details:
Pros And Cons of Top-Up Loans are:-
Pros of Top-up Loans
The primary benefit that you can expect from the top-up loan is instant generation. If all your previous records of your payment are clean, you can quickly get the top-up money on your loan. The time of generation can differ depending upon the banks. You can extend a top-up loan to a long time compared to the original structures of personal or home loans.
Top-up Loans have Tax Deductions
The borrower can put up a tax deduction claim if he has already got a top-up loan. This is the most convenient way to save a decent amount of money from draining out. Try talking to your financial advisor on how you can reduce the payable tax.
No loan Agreement needed
As a top-up loan borrower, the bank will not ask you to go through the process of a loan agreement. Thus, it can be a stress-free process for you to apply for a top-up loan in a bank.
Cons of Top-up Loans
Rate of EMI can Increase
While you take the top-up loan, the EMI can naturally increase. This can lead the borrower to repay some more money to the lender than what he was paying before. This can be considered as a con of top-up loan.
Financer related restriction
While taking a top-up loan, you must be aware that the financer cannot be changed in any instance. You need to stick to the bank from whom you have taken the previous loan. This restricts any new customer to straight away receive a top-up loan.
You must be well aware of all the changes that can happen to your loan plan if you apply for a top-up loan. Moreover, you need to determine whether you can comfortably manage the repayments on taking a top-up. Communication with your provider is essential when it comes to managing the top-up loan without any stress. As more capital money enters due to a top-up loan, you can easily do the desired job at an increased pace.
Consider all the positive and negative aspects while taking top-up loans. If you are a good customer and have a history of managing a loan satisfactorily, you can get this loan right away from the bank. However, it is essential to check whether the bank is setting a limit on the top-up loan or not.