Which One Works Better? Fresh Personal Loan or Top-up LoanRawat February 13, 2019 0 COMMENTS
There are plenty of situations in our liveswhen we have an urgent need for money. In times of such dire need, it has often been the case thateither our funds are locked up in FDs or they are consuming a lot of time to cash out against investments inmarket securities. In such cases, the common solution that many peoplego for is to take a personal loan or some other type of a loan. Depending on what the need is, one tends to opt for a particular category of loan, viz. housing, car or personal, etc.
A lot of situations occur because of forced or unforced errors (to use a tennis metaphor). In such cases, atop-up personal loan with its many attractive features (most importantly a lower interest rate) seems to be a viable option. Of course there are other options available to consumers like the ability to port their loan to another bank, also known as balance transfer facility.
Why Opt for a Top-Up Loan?
In recent times, there have been cases where it was recommended by financial advisors to avail a top-up loan instead of applying for another loan or going for a balance transfer. That is primarily because, although the bank to which the loan is ported may have a better rate of interest, the borrower may face a risk of a lesser credit score if he / she lands ina toughspot even with the next bank.
Conversely, if your current loan with an existing bank has gotten a bit more difficult to repay, it helps a great deal to avail a top-up loan for a number of reasons; one of them being,the bank where they have an existing relationship with where, they cansee that they are actually taking pains of availing a top-up personal loanto repay their earlier dues, and hence will not initiate proceedings to further downgrade their credit rating.
Looking at it from a ROI perspective, it does make better sense to avail a top-up personal loan since the interest rate for a top-up loan is a few percentage points less which, makes it less burdensome and easier to pay off both, the original loan as well as the top-up loan. This is nothing short of a win-win situation for all parties involved in the transaction.
To sum it all up, it can be clearly seen that although it is preferable by both the lending institution as well as the individual to pay off their EMIs and be on the safe side, a top-up loan works wonders too. Thus, a personal loan availed as a top-up to pay off the original loan is equivalent tohitting two targetswith one dart!
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