Top-up personal loan vs personal loan: Know the advantages

A personal loan is a collateral-free credit instrument with a fixed repayment tenor. On the other hand, a top-up personal loan is an amount offered over an active personal loan by the same lender. 

Therefore, to help you consolidate your financial corpus and make an informed decision, here is a detailed list of comparisons and advantages of both credit forms.  

6 Differences between a top-up and personal loan

Some basic differences between top-up and personal loans are listed here:

Interest rates 

The interest rate of a top-up loan is lower than a personal loan. The top-up loan is given on a personal loan for a shorter tenor; hence, the interest rate is less. 

A personal loan is an unsecured loan, which is given for a longer tenor; therefore, the interest rate is higher. An interest rate calculator can help borrowers to compute the EMIs and the overall interest outgo.

Loan approval

A top-up personal loan is given to existing personal loan borrowers. As an unsecured loan, one does not need to pledge collateral to get a top-up loan; however, it’s entirely dependent on the personal loan status. As the borrower has already met the eligibility criteria, it is given without conducting thorough verification.

However, to avail a personal loan, one has to successfully meet the set eligibility criteria.


A top-up loan requires an excellent personal loan repayment record. On the contrary, a personal loan requires a good CIBIL score, at least more than 750 and above, failing which will lead to application cancellation.


The documents necessary for a top-up personal loan is minimal as the borrower had provided all documents during personal loan verification. Some financial institutes take no documents for this type of loan.

However, potential applicants need to submit all the required documents to avail a personal loan hassle-free.

Emergency fund

A top-up loan provides emergency funds to meet sudden expenses. It gets instant approval based on personal loan repayment status and other eligibility criteria.

On the flip side, a personal loan takes a long verification time. Therefore, a personal loan disbursal takes longer than a top-up personal loan.

Loan amount

The top-up loan amount is lesser than that of a personal loan. Though the loan amount varies from one financial lender to another, it depends on eligibility criteria, credit history, and other factors.

Similarities between a top-up and personal loan

Some of the similarities between a top-up personal loan and a personal loan are:

  • No collateral is require for any of these credit forms.
  • Both the loan amount can be use for any purpose; there is no inlaid restriction by the lender on the usage. Therefore it can be use to manage business growth.

Advantages of a top-up personal loan 

A top-up loan is highly beneficial for borrowers because of:

  • Interest rates – The main advantage of a top-up loan is its low interest rate. Using an interest rate calculator, a borrower can easily find out the exact interest outgo. A top-up personal loan can be use to fund business operations as there is no restriction on usage.
  • Added finance facility – To support the additional requirements of the fund without affecting the ongoing loan, one can easily avail a top-up loan at the earliest.
  • Tax exemption – Under Section 80C and 24, a top-up loan is eligible for tax exemption if the amount is use for buying or renovating a residential property.

Advantages of a personal loan

Benefits or advantages of a personal loan are:

  • Purpose – Borrower can use this for any purpose; the lender does not restrict its usage.
  • Security – No collateral required
  • Borrowing limit – One can avail a loan of up to Rs.25 lakh  
  • Interest rate – It has a low-interest rate

To maximise the benefits of a personal loan, many financial institutions provide pre-approved personal loan offers to further simplify the loaning process. Individuals can check their pre-approved offers by providing their names and contact details. 

A personal loan is an extremely helpful debt consolidation tool. In comparison, a top-up personal loan is an advanced loan that lowers the borrower’s financial burden and is helpful in meeting additional requirements of funds. With all the information shared, one can decide on choosing the right of credit at difficult times.

Comments are closed.