What is the Difference Between Top-up Home Loan and Personal Loan?

Top-up Home Loan and Personal Loan: Homeownership is in itself a form of financial security. However, since buying a house is a huge investment, you may lack the finances to pay for a house as a one-off payment. Loans are your go-to solution but you may need some guidance on the type of loan to take and why.

Top-up Home Loan and Personal Loan- A Personal Loan Vs a Top-up Home Loan:

Any individual is in a position to get a personal loan. Whereas personal loans can be availed to anyone, top-up home loans are availed only to people with an existing home loan. However, only a person with an excellent payment history may get a lender to avail money on top of an existing home loan for emerging needs.

Tax Benefits

A top-up home loan is a loan that provides additional funds to an existing mortgage or line of credit. The new funds are used to pay off any remaining balance on a mortgage or line of credit and increase its size. You may not be required to fulfill tax obligations for these additional funds. However, personal loans do not come with such advantages. Therefore, you will lose some of the money borrowed in personal loans to taxes, an expense that may not exist for top-up loans.


When you apply for a home loan, the bank will want to lend you money based on the value of your home. If you default on the loan, the lender has the option to sell your property to recover their losses. A top-up home loan is different in this regard. The bank or lender does not take your house as security for the loan. Instead, they will look at other sources of security such as vehicles and other assets that you own. This is why top-up loans are also known as second mortgages or equity loans.

Interest Rates

Personal loans are usually classified as unsecured loans. Unclassified loans are based on your credit score and you often do not provide any collateral as security for when you default on your payments. For this reason, personal loans will have high-interest rates of up to 20%.

When you opt for a top-up loan, since you have provided collateral for your loan, interest rates tend to be lower since the loan is secured. For veterans who have served, current or former National Guard or Reserve members who meet VA loan requirements, you are guaranteed low-interest rates as you get to own a home.

Loan Processing Time

When applying for a personal loan, your bank or financier will require certain documents before you get a green light. After delivering these documents, your financier takes some time to comb through your application and make certain that you can pay back the loan. All these steps make the loan approval time very long.

As stated earlier, a top-up loan is an additional loan on an existing financial obligation. Since your financier already has your documents and also because you are a model client who pays your deposits when due, a top-up loan takes a very short time to approve. Most financiers allow you to apply online for a top-up loan and your approval may go through within hours.


The tenure for any loan is very important. It determines the amount you pay monthly to service your loan. A short tenure might be straining for you while a long tenure provides you with a comfortable loan servicing plan. Personal loans often come with a tenure period of six months to seven years. Such a short tenure period may negatively impact your principle.

Top-up loans are offered on a flexible tenure period. In most instances, your financier will offer you your remaining tenure period on your home loan as the tenure for your top-up loan. With such a flexible option, you are less likely to be burdened by loan repayment.

Documentation for the Loan

Since the bank has all the documents you used while applying for your mortgage, documentation for a top-up loan is simple and not as time-consuming. An application for a personal loan requires that you not only fill and submit numerous forms, you also may be required to avail yourself in person for specific submissions.

When all is said and done, top-up home loans are a better bargain as compared to personal loans. Make the effort to seek necessary financial advice before settling on any loan. Top-up Home Loan and Personal Loan, Top-up Home Loan and Personal Loan, Top-up Home Loan and Personal Loan.

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Author Name– Steffy Alen


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