When Can a Personal Loan Top Up Cost More, and What are The Options?
January 11, 2023

Acquiring funds as a Top to an existing Personal Loan is quick and convenient, particularly if required in an emergency, but it is worth the while to check out the terms and conditions and the costs that apply for a Top Up. Other options, such as a parallel loan from the parent or an alternate Bank, may be available with more suitable offerings.

Significant Factors That Can Make a Difference and Should Be Considered are:

Terms and Conditions of The Existing Personal Loan

The interest rate for a Personal Loan will be applied as per the current ongoing rate if the interest rates have increased, the interest rate for the principal balance of the existing loan with the Top Up(as per the Top Up process) will be costlier and as per the revised rate.

If The Competition is Offering Better Terms

The interest rate for a Personal Loan is not standardized across lenders banks and NBFCs offer interest rates as per the individual policy and customer profile and another lender may be willing to give funds at a better rate of interest. A New Personal Loan from an alternate Bank can come at a lower price.

Vintage of The Existing Personal Loan

Topping Up a personal loan early in the tenure serves well as a minimum of interest has been paid. As the term progresses the central portion of the interest is repaid, so the cost of funds will increase after a Top Up.

Following approval the previous loan is closed and a new loan account is restructured with the balance of the existing loan and the Top Up amount. Interest is charged per a new repayment schedule not considering the previously paid interest amount.

Foreclosure Cost

A Personal Loan can be repaid after paying 12 EMI charges are also applicable per the lender’s policy. If the intention is to pay back the amount borrowed quickly a Top Up can prove costlier as the applicant will have to cover another 12 EMI before the prepayment is allowed. Pre-closure charges levied will be applied to the existing balance of the previous loan and the Top Up.

If The Applicant Has Changed Employment

The company category of the applicant plays a primary role in the terms and conditions offered. If the customer has changed employment recently the Personal Loan Top Up will be processed as per the status of the current employer. A higher interest rate may be applied if the company category has been downgraded.

Making an informed decision will help to reduce costs, as the terms of a Top Up will affect not only the current loan amount approved but also the balance of the previous loan.

Other Options Available To Top Up When There is a Requirement For Finance Include:

A Parallel Personal Loan

A Parallel Personal Loan runs simultaneously with the existing Personal Loan. The terms and conditions may differ from the existing Personal Loan and will be applied per the current interest rate and eligibility of the applicant.

An applicant can apply for a Parallel Personal Loan to the existing lender or any other Bank the application will be processed as a new loan and if approved,run independently of the previous loan.

An additional EMI will be presented to the applicant’s Bank account for the tenure approved.

Balance Transfer With a Top Up

A Top Up is available to eligible applicants with the Balance transfer of a Personal Loan. Applicants requiring additional funds can avail of a Top Up with the Balance Transfer of the existing loan to an alternate Bank.

Banks offer the lowest interest rates to customers with an on-time repayment track for a Personal Loan Transfer, with the advantage of extra funds as a Top Up at a lowered cost. The conditions are that the loan should be eligible for a Balance Transfer.

All credit comes at a cost it pays to get a broader view before taking any credit. Taking time to research what works best for you will help to reduce costs significantly. Meanwhile maintaining a stable CIBIL score by making payments on time is a priority to get funds on the best terms when required.


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