Any type of loan comes with a lot of responsibility and requires a strong commitment to your finances. It is important to remember that any loan you take is a financial obligation, which must be paid back along with the interest. Be extra cautious and consider twice whether you want to apply for a loan. Many banks and finance companies provide different types of loans for different people. This includes car loans, home loans, personal loan, gold loans, etc. Some of these loans fall into the secured category, while others are unsecured. Loans are used for different things and can help you meet your needs. People often become confused when it comes time to choose between a home top-up loan and a private loan. A home loan is the best way to finance a purchase of a new house, but a top up home loan can help you with additional funds for home renovations or extensions. These requirements can also be met with a personal loans. Personal loans are another alternative. Before you decide, let’s compare the top-up loan and personal loan.
Personal Loans: What is it?
All the leading lending institutions offer personal loans, which are unsecured loans. This loan can be obtained online from home or the office. This loan has a higher interest rate than other loans, so you should think twice before taking it out. The loan is not restricted in terms of its use and it can be used for anything.
What is a Home Loan Top-up?
The top-up loan is an extra loan you receive from your lender to supplement your mortgage. You only need to provide minimal documentation because you have an account already with the lender.
You can use Top-Up home loans to renovate or extend your house, or for any type of renovation or construction work. There are some restrictions on the use of the loan, but it’s still a good option for customers because the rate is similar to that for home loans.
Now let’s compare the two loans:
Rate of Interest
The top-up loan will always be added to your existing loan. You can get the top-up loan with the same rate as your current home loan. It makes borrowing easy and more affordable. The lender will not require you to give additional collateral, and you can get the loan at a lower rate. Personal loans have high interest rates, which are usually between 10-16%. A Personal Loan, however, is 100% secure. You do not need to put up any collateral or security.
The tenure Period
If you choose a loan over the standard 20-30 year period, then you will be able to extend your loan for 5-7 years. Personal loans can be extended up to five years. Also, top-up loans for home offer more flexibility in repayment.
Loan disbursal time
The loan is disbursed in 4-5 business days for a personal top-up loan. It is because the loan is secured and the lender must update all the documentation that was completed when you took out the loan. If you need money urgently and are facing an emergency, then personal loans may be the best solution. The majority of lenders offer instant loans, and money can be credited to your account in just a few hours. Documentation is minimal. Personal loans are a good option if you urgently need cash.
Limitations on End Use
You are not restricted in how you can use a personal loans. The money can be used anywhere you want. If you take out a home top-up loan, there may be restrictions on how the money is used. This includes using funds only for home construction/renovation/extension or panting.
The most significant difference is that a home top-up loan can be obtained only by people who have a home loan. Anyone can get a personal loan to meet their financial requirements. If you have a current home loan but are experiencing cash problems, don’t overlook factors like the EMI and tax benefits.
