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- How much top-up personal loan amount are you eligible for?
- Check out the factors that help decide the eligibility - in this post
Financial needs keep emerging with time and can make individuals apply for loans more than once in their lifetime. In case you took a personal loan a few years back, there’s no denying you may require another personal loan down the line and very soon for that matter. Keeping this in mind, lenders keep a close eye on your existing loan repayment track and send you regular notifications of top-up personal loans on your mobile or email address. There are also possibilities of you not getting the offer from the lender. But you can apply for the same. A top-up loan, which is an add-on over the existing loan amount, will be useful only if the sanctioned amount is enough to meet the pending needs. So, you could ask, how can you increase your top-up personal loan eligibility? To get an answer to this question, you can read this post that highlights the points on which your loan eligibility is contingent on.
Greater the income you have, the greater the repayment potential you’ll have. The income factor is even more important as you are already servicing a personal loan over which the top-up loan amount will be given. The lender would like to ensure the total EMI (Running Loan EMI + EMI of the proposed top-up loan amount) remains within 50%-60% of your net monthly income. Such a ratio makes the lender confident about your repayment capability. This only tells you that, for a greater top-up loan amount, the income has to be substantially higher.
Lesser Expenses & Obligations
For an increased top-up loan amount, it is also important to have your expenses under control and debt obligations are fewer. Your existing personal loan obligation is already there. And if you are using any credit card, the lender will see the outstanding balance of the same. If you have revolved the credit on your credit card too much, the top-up loan eligibility could reduce substantially.
Credit Score & Repayment History
As soon as the top-up personal loan application is made, the lender will pull your credit report and see your credit score, which ranges from 300 to 900 in India. If you have a credit score of 750 and above, you give yourself the best chance to get an impressive top-up loan amount. The lender will also check your repayment history and see the number of credits you are currently handling and the way you are handling them.
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How Does the Top-up Personal Loan Work?
The top-up amount will be given over the existing personal loan. Most likely, the top-up loan will get added to the running balance. There will be a consolidated EMI. Given the flexibility that customers seek these days, banks can give you an option to keep the existing loan and top-up loan separate too. Choose the one that you feel comfortable with.
Example – You took a personal loan of INR 5 lakh for 5 years at an interest rate of 12% per annum two years ago. With this, you must have been paying an EMI of INR 11,122, which will eventually lead to total interest payments worth INR 1,67,333. The outstanding balance has come down to INR 3,34,862. So far, you have paid interest worth INR 1,01,796. If you apply for a top-up amount of INR 1 lakh, how will the repayment pan out if the bank gives you a choice either to consolidate the loan or separate them? If the tenure from here on is 3 years in both cases, there won’t be any difference in terms of repayment. Only when there’s a change in the tenure of the two top-up loan processes will the repayment vary. Let’s assume the top-up loan component is allowed to run for only two years when they are offered separately from the existing loan. Let’s check out the table below.
|Repayment Aspects||When Loans are Consolidated (In INR)||When Loans are Offered Separately (In INR)|
|EMI||14,444||Existing Loan - 11,122|
Top-up Loan - 4,707
|Interest Outgo||85,109||Existing Loan - 65,537|
Top-up Loan - 12,976
|Total Interest Outgo Including the Amount Paid So Far||1,86,905||1,80,309|
So, you can see a savings of INR 6,596 when going with a curtailed tenure of 2 years from here on.
Can You Go for a Top-up Loan Using the Balance Transfer Route?
Top-up personal loans granted from the existing lender is known to many. But very few know the service is also given by the new lender. So, when you apply for a balance transfer at another lender at a lower rate of interest, you can also apply for a top-up amount over the same. Ensure the balance transfer deal comes at an interest rate of at least 3%-4% lower than the existing lender. This will fetch you maximum benefits on a balance transfer. We have already elaborated on a personal loan balance transfer before. Read it and know how to approach the same.