Should one go in for a TOP UP LOAN or a PARALLEL LOAN, which is the better choice for an Applicant to make if Additional funds are required?

Highlighted Below is the Major differences between both these products which can influence your decision.

Description

Top Up Loan is an extension or addition of extra amount to the Primary or Previous personal loan of the Applicant which is already running with the HDFC Bank.

A Parallel Loan is an additional Loan to the existing personal loan availed from the Bank. The existing Loan is not closed and the Parallel loan is processed.

Guidelines

  • A Top Up or a Parallel Loan will be processed as per the following terms & conditions;
  • No EMI should be overdue for the existing personal loan.
  • There are no cheque bounces or EMI bounces in the track of the existing personal loan
  • The CIBIL record of the customer will be checked to see the current debt scenario.
  • Job stability of the customer will be verified as per his current status & net income.
  • If there has been a rise in the current income his eligibility will increase else if his income has decreased his eligibility will be viewed accordingly.

A Top Up loan or a Parallel loan will be processed only after a gap of 3 months of the disbursal of the previous loan.

Process

The Process for a Top up & Parallel loan is similar to a fresh Loan.

All requisite documents need to be submitted again, the application will go through all stages as for the process of a Fresh Personal Loan.

Transfer of Funds

If the Top Up loan is approved funds will be transferred as per the following process;

The Existing Personal Loan will be closed internally by the HDFC Bank.

The principal amount balance of the existing loan will be clubbed with the new amount sanctioned.

A new agreement will be signed by the applicant as per the current Rate of Interest & pre closure charges.

A single new EMI will be introduced for the new loan amount as per the tenure & amount approved.

For a Parallel Loan

If the amount approved is applied as a Parallel Loan;

A fresh Loan agreement will be signed for the new amount.

The Rate of Interest, processing fees & pre closure charges will be levied on the fresh loan amount as per the current policy of the HDFC Bank.

An Additional EMI will be then structured as per the current Rate of Interest & tenure.

Advantages of a Personal Loan Top Up

  • A single Emi will be paid henceforth for the new amount.
  • The eligibility will increase for a greater loan amount as a new EMI will be recalculated for the principal amount balance & the additional loan amount approved.

Disadvantages

  • Having already paid a substantial amount of Interest factor on the principal amount of the existing loan, the applicant will have to pay interest again on the principal amount which is added to the Top Up amount.
  • Applicant will only be able to close his current Top up Loan as per the new agreement signed; he will thus lose out on the pre closure benefits gained by the vintage of his existing personal loan.

Advantages of a Parallel Loan

  • A fresh Loan will start with no relation with the previous Loan amount. The existing personal loan can be paid back as per the convenience of the customer.
  • Applicant can also opt for a Balance Transfer of his previous loan thereby getting a much lower rate of Interest.

Disadvantage

Customer will have to be responsible for payment of an additional EMI.

Advice from yourloanadvisors.com

It is advisable to apply for a Parallel Loan as terms can be negotiated independently for the additional Loan Amount.

The previous loan can be paid back independently if extra funds are available after 12 months (As per HDFC Bank TERMS & CONDITIONS).

Pre closure charges will be will be charged as per the tenure & principal balance amount of the previous loan amount.

A Balance Transfer of the previous Loan can be affected to get a lower Rate of Interest.