Hobby or need? Read these 'dos and don'ts' before taking a top-up loan, otherwise you will get a shock.

People often take personal loans in times of emergency, but have you ever heard about personal loan top-up? So let's know about this loan, how to get it and what is the process.

Many times, in case of an emergency, money is needed immediately, in such a situation, personal loan comes as a support for many people. But sometimes some people already have a personal loan running and the bank will take a long time to give a new loan. In such a situation, most people get nervous. But wait! What if we say that your old personal loan can become an ATM for you?

Yes, you heard it right. Banks have started a facility for their trusted customers, which is called 'Personal Loan Top-Up'. 'Personal Loan Top-Up' is such a 'magical formula' that can quickly fulfill your sudden need of money. So let's understand in simple language what is this 'loan on loan' and how does it work.

What is this 'personal loan top-up'?

Let's understand with an example, let's assume that you had taken a personal loan of Rs 3 lakh from the bank and you have paid its EMI on time for the last one year. In such a situation, the bank is happy to see your record. In such a situation, the bank itself can offer you that we are offering you another loan of Rs 1.5 lakh on your existing loan." This extra amount is called 'top-up'. This is not a new loan, but in a way it is an increase in the limit of your old loan.

Know its 3 big benefits.

1-No hassle of paperwork: The bank already has all your information, so you do not need to submit a lot of documents like income proof or address proof again.

2-You will get money immediately: While everyone has to wait for weeks for a new loan to be approved, the money for a top-up loan often comes to your account within 24 to 48 hours.

3-One EMI, one tension: Often everyone worries about paying EMIs of two different loans, but you don't have to. A new loan is created by combining your old and new loan amount and you have to pay just one EMI.

When should you take a 'top-up'?

Top-up loan can be a great option in today's time, but it is not for every situation. Always keep in mind that it should be taken only when the need is really very important. For example, if money is needed immediately in a medical emergency, then this loan can be the fastest and best option. If you have taken a loan from an expensive credit card or friends, then a top-up loan can be taken to repay it. Apart from this, it can also be the best option for necessary repairs of the house or for the sudden school fees of children.

For which works never take a top-up loan

Top-up loan can be called a double-edged sword. This loan can be beneficial if taken wisely, but if carelessness is shown, it can cut your pocket. Yes, never take this loan to buy an expensive phone or gadget, to travel during holidays, to invest money in the stock market, or just for show-off and unnecessary shopping. Let us tell you that taking a loan for such needs can harm your financial health and can trap you in a debt trap for a long time.