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2 mins Read | 2 Years Ago

Should you get a Top-up Loan or a Fresh Loan?


When investing in a long-term asset like your home paying the entire amount out of your pocket is not a possibility. Thus, depending on a Home Loan is your best way out. Let’s find out if you should get a Top-up loan or a fresh one when you need more money.

Difference between a Fresh Loan and a Top-up Personal Loan

You need to understand the basic difference between these two types of loans before you make a decision.

A fresh Personal Loan is the Unsecured Collateral-free Loan that an individual can avail for their needs. On the other hand, Top-up loans are a type of Secured Loan that only existing Home Loan borrowers can avail. As the name suggests, Top-up loans are like booster loans that are given to the existing borrowers.

Should you go for a fresh loan or a Top-up Loan?

Since you have a clear idea about the difference between the two, let’s see which one is a better option. Now, you can get both a Personal Loan and a Top-up Loan with ICICI Bank. Choosing a Top-up Loan or Personal Loan depends on the tenure, your urgency of loan requirement and interest rates. Personal Loan interest is comparatively higher than that of a Top-up loan.

Top-up Loans are taken for a lengthy tenure of about ten years or for the rest of the existing Home Loan’s tenure. On the other hand, Personal Loans are offered for not more than five years.

When you avail loans for home extension or home renovation, the Top-up loans might offer different types of tax incentives that can’t be availed with a Personal Loan. All Home Loan borrowers cannot use the Top-up facility. The bank will prefer individuals with good credit scores and stable payment history to sanction their Top-up loans.

Since the bank already has your KYC documents and other details, processing a Top-up loan is easier and faster for the existing customers. Additionally, ICICI Bank gives you an absolute digital experience for its Insta Top-Up Loan, where no physical documents are required.

Also, the Top-up loans have a long tenure, which results in a lower EMI (Equated Monthly Instalment). With less credit availability in the market, Top-up Loans are beneficial as they tend to have a better rate of interest with the existing lender.

When is a fresh loan a better option over a Top-up Loan?

A Top-up loan on the existing Home Loan is going to increase the principal amount owed thereby reducing the equity. The Top-up Loan needs to be cleared before trying to sell the apartment bought with a Home Loan. This will not be the situation if you take a fresh personal loan.

Top-up loan or fresh loan: What’s the answer?

Consumer need is the most important factor while deciding which type of loan to opt for. It depends on how quickly the funds are needed and the duration, whether long-term or short-term. Advise from an ICICI Bank financial expert is the ideal way forward as they will guide you in choosing the right loan as per your necessity.


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