All You Need To Know About Top-Up Loans

By | February 18, 2016

All You Need To Know About Top-Up Loans

Anoop took a Home Loan in 2011 to construct a single-storey house. In the year 2014, his entrepreneurial spirit kicked in and he decided to start a small business from his home with the help of his spouse. In order to raise funds for starting his new business, he approached the same bank from where he had taken his existing Home Loan.

He went there with the thought of applying for a new Personal Loan to help raise funds for his new business. But he was then advised by his bankers to opt for a top-up loan on his existing Home Loan. They advised that applying for a fresh Personal Loan would only increase his burden of EMIs. Anoop applied for the top-up loan and got the funds to start his new business.

That’s how Anoop acted smart and took a top-up loan on his existing Home Loan instead of taking on the additional burden of paying a Personal Loan’s EMIs.

Let us help you understand how a top-up loan works and you too can make a similar wise decision.

What is a top-up loan?

A top-up loan is an additional amount of money that you receive from the same bank where you have an existing Car Loan or Home Loan. It’s almost like a Personal Loan, but it comes at a much lower rate of interest. A top-up loan can be used for any purpose like funding your child’s education, medical emergencies, renovating your house, a wedding, starting your own business or any other non-speculative reason – similar to a Personal Loan.

Features of a top-up loan

  • Simplified documentation and faster approval
  • Alluring rate of interest
  • Easy repayment facility
  • Lower EMIs
  • Availability of longer tenures
  • Fulfilling different needs of clients

Documents required

  • Application form duly signed along with photographs
  • Identity and residence proof (any of the KYC documents)
  • Existing Home Loan or Car Loan documents
  • Premium paid receipt of the existing loans (last three or six months)
  • Income proof – salary slips, bank statements, and IT returns

The list of required documents may vary from one bank to another, so check with your preferred bank. Also some banks may have these documents with them already if you have an existing loan with them, so there’s a chance they may forego the entire documentation process.


Top-up loans are generally available for 10 or 15 years (depending on the bank).


Just like any other loan, a top-up loan also has processing fee charges, late-payment fees, cheque-bounce fees, and additional charges as applicable. The fee amount will, however, differ from one bank to another.

Points to remember

Here are a few things to keep in mind when you apply for a top-up loan:

  • Processing fees and other charges: If you are planning to shift your existing Home Loan or Car Loan to any other bank, check the interest rates, foreclosure charges, and processing fees before applying for a top-up loan from the new bank as you could incur additional charges.
  • Property value: Banks would consider offering a top-up loan only after evaluating the appreciation of the property’s value. You may not always get the amount that you were looking for, so have a thorough discussion with your bank.
  • Bank’s discretion: Not all banks offer top-up loans on existing loans. It’s completely at the bank’s discretion, so double check with your bank if they offer top-up loans.

Which one’s better: Personal Loan or top-up loan?

As we mentioned earlier, a top-up loan is similar to a Personal Loan. In fact, it could be better than a Personal Loan for the following reasons:

  • Lower rate of interest
  • Longer repayment tenure
  • Faster processing
  • Lower EMI amount

So, if you want to save some money and act smart, taking a top-up loan on an existing Home Loan or Car Loan may not be a bad idea at all!

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