Definition
Top-up Loan
A top-up loan is additional borrowing on top of an existing loan, usually a home loan, often at a similar low interest rate.
A top-up loan lets an existing borrower — typically a home-loan customer with a good repayment record — borrow extra funds over the current loan, often at a rate close to the home-loan rate and much lower than a personal loan. The end use is usually unrestricted.
It is convenient because it leverages your existing relationship and collateral, needing little fresh documentation, and offers a longer tenure than personal loans. It is commonly used for renovation, education or other large expenses.
Lenders often pair a top-up with a balance transfer to attract borrowers. As with any secured borrowing against your home, missing payments puts the property at risk, so borrow only what you can comfortably repay.
Related terms
- Section 24(b) Home Loan InterestSection 24(b) lets homeowners deduct the interest paid on a home loan from their income from house property.
- Balance Transfer (Loan)A loan balance transfer moves your outstanding loan from one lender to another, usually to get a lower interest rate.
- Loan Against Property (LAP)A loan against property is a secured loan where you mortgage residential or commercial property to raise funds for any purpose.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.