Are loan top-ups more cost-effective for you than applying for a new loan?

Are loan top-ups more cost-effective for you than applying for a new loan?

Dubai: Let’s say a loan you’ve taken to buy a home or a car falls short, then you may need to borrow additional money to bridge the gap. You would then have two options – either to take a top-up loan against the existing loan, or take a separate personal loan. “A top-up loan is like a booster loan given to an existing borrower and is generally preferred over the personal loan as the interest rate is often relatively lower as compared to personal loans,” said Dubai-based banking and credit analyst Rupesh Naish. “Moreover, considering that the lender would already have your details or documents, the processing of the loan will be faster and easier. Besides this, even the tenure for a top-up loan is longer, which can result in a lower Equated Monthly Instalment (EMI), making it a better option among the two.” The interest on a top-up loan is generally comparable to the interest against the original long-term loan and doesn’t need additional paperwork, but is hard to get sanctioned. On the other hand taking a personal loan may be expensive, but easier to take. “However, not every borrower is offered a top-up loan facility. Only individuals with