Is a top-up home loan better than a personal loan?

Banks and housing finance companies offer a top-up home loan to borrowers on top of their existing home loans. This top-up is generally offered to borrowers with a solid credit and repayment history.

The additional amount received as a top-up on the home loan can be used for various personal and professional needs like marriage, child's education, business expansion, debt consolidation, etc. However, it should not be used for speculative purposes. In this sense, a top-up home loan is like a personal loan. But, is it better than a personal loan?

Yes. A top-up home loan is generally considered a better option than a personal loan for several reasons. Some of them are as follows:

The table below shows the difference in interest rates for top-up home loans and personal loans across three banks. You can see a sharp difference in the interest rates for both type of loans.

Source: Bank Bazaar

Additionally, a person can avail of large top-up loans, maybe up to 100% of the original loan. In contrast, the amount approved for personal loans is limited based on the borrower's income and credit score.

However, top-up home loans may not be available at all times. In case you need funds urgently, a personal loan may be a better option as it can be disbursed within hours.

However, if you already have a home loan, you should check with your bank if they can provide a top-up home loan.

Generally, banks allow applications for a top-up home loan after 12 months of the final disbursement of an existing home loan and upon possession/completion of the existing financed property.