If you already have a housing loan, then it is obvious that a part of your monthly income would be going towards servicing of EMIs. At this juncture, if you have a sudden fund requirement, it can be a cause of big concern.

If you cannot withdraw from your savings or take help from friends or family, the only other viable option would be to take a personal loan. Now personal loans are quick and easy way of shoring up your finances. But is that the only option?

If you are a home loan borrower, you have another option: top-up loan.

A top-up loan is a loan that is given on top of existing home loan and against the same collateral (which is the house in this case). It costs less than personal loan interest rates and generally has a longer repayment tenor. Top-up loans are offered at rates that are about 2% higher than the home loan interest rates. Since these are still much lower than what personal loans costs, these are better option to avail short term funding.

Why do lenders offer such top up loans?
The reason is quite simple. When you have taken a housing loan, the loan gets paid back over the years, so outstanding amount keeps decreasing. Also the income of borrower keeps increasing. So mathematically, your new loan eligibility will go up. So the difference between current loan eligibility and existing outstanding loans is the amount that you can take as a top up loan. Since lenders already have a collateral (house) in place, it’s easy for them to lend to a existing borrower.

But a lot of weightage is given to borrower’s home loan repayment track record. So if you have a good record, you can get the top-up loan very easily. You can still consider applying for personal loan if you have a very urgent requirement. It’s because the technological advancements have made the entire process transparent and extremely quick. It’s possible to get personal loan disbursement within a few hours.