What to Choose – Personal Loan or Top-Up Loan While Buying a House?


Buying a new house is always a big step in anyone’s life, especially financially. While some dig into their savings, most prefer taking a loan. To bear the costs that accompany a property purchase, like making the first down-payment, etc., can be easily done with the help of a top-up or personal loan.

However, one must know the difference between availing a personal credit and a top-up loan and the features and benefits of both. The following table includes primary attributes of both the loans, including eligibility criteria, interest rates, tax benefit, foreclosure charges, tenure, etc. Read through to make an informed choice about which loan will suit your home purchase requirements.


Personal loan

Top-up loan


This is an unsecured credit, where borrowers don’t have to put down collateral or security deposit before applying for finance.

Top-up finance is a secured loan that borrowers can avail from their existing home loan provider.

Availability and End-use

You can avail personal finance even if you are a first-time borrower. While applying, there is no requirement to reveal the end-purpose. The loan can be easily used to cover the realty purchase expenses.

You can only apply for a top-up credit if you have already borrowed a home loan from the lender. However, there is no restriction on the usage, and you can conveniently take care of the additional home purchase expenses.

Interest Rates

Personal loan interest rates usually start at 10.99%.


The interest rates of top-up loans are the same as home loan interest rates. They typically start at 8.50%.


Lenders sanction anywhere up to Rs 25 lakhs and even more as per the situation.

Up to 30% of the existing disbursed home loan can be availed in a top-up loan.


Borrowers can receive loan tenures for up to six years.


Total tenure can be as high as 30 years or the same as the home finance’s remaining tenure.


Since this is unsecured credit, personal loan eligibility conditions depend on CIBIL score, work experience, minimum income, job stability, and more.

Financial institutions usually offer different criteria for self-employed and salaried individuals.



 For top-up credit, you must be an existing home loan borrower and your payment history should be free from defaults or late payments. Besides, lenders also look for a good CIBIL score, preferably over 750 in their potential customer.

Foreclosure charges

Charges can range anywhere between 2-5%. No charges can be levied too in some situations.

Typically, no charges are levied.

Additional Fee

Processing fee can be up to 2.75% of the entire loan amount. The charges may be waived off in certain scenarios.

Since the borrower is an existing customer, the fee is waived off in special promotions or depending on the relationship with the lender. If not, the fee can be anything up to 1% of the total amount.

Tax benefit


Same as the existing home loan.

Both loans offer distinct benefits. Choosing any one will depend on your personal situation. However, make sure you do thorough research before availing any of these two loans.