5 Benefits of Getting a Top-Up Loan to Meet a Financial Shortfall

A monetary shortfall occurs when you do not have enough funds to meet a financial obligation. Examples of this situation include not being able to pay your monthly credit card and utility bills or an outstanding hospital or school fee.

A financial shortfall can happen in your personal life and business-wise if you run your own company. It can be unexpected, resulting from an emergency, or an expected event that you are sure will occur in the future.

Monetary shortfalls can also be either short- or long-term. Regardless of how long they occur, they can cause you a lot of stress and headaches.

Whether you are expecting a deficit or not and whether it is of a personal or business-related nature, allowing it to simply happen is not an option. Doing so can land you into more financial troubles that you will find harder to get out of.

Reasons to Get a Top-Up Loan

One of the best microfinancing solutions that can help you during a financial shortfall is a top-up loan.

It is a provision that helps you get a certain amount on top of your existing loan, allowing you to acquire extra money which you can use for various purposes.

A top-up loan is a financing option you can consider if you already have an existing home, car, or personal loan. Most banks and lenders offer this solution to borrowers who have been repaying their credit diligently during a certain period, usually for at least a year.

Opting for a top-up loan is a wise decision when you are expecting or dealing with a financial shortfall since it offers the following benefits:

1. Low Interest Rate

Getting another loan might be your first option when you need additional funds. This option, though, means dealing with a new set of interest rates.

The biggest advantage that top-up financing offers is that its interest rate per annum is lower than that of a new personal loan or one against credit cards.

When you get top-up financing, you will likely get an interest rate that is the same as that of your current loan, or one or two points higher.

For instance, if your current loan interest rate is around 5.5 percent, the top-up loan interest would likely be 5.6 percent. Because of this, it will be more affordable than the percentage you will end up paying if you get another loan.

If you need extra funds without paying a high interest rate, top-up financing is your best option.

2. Quicker Processing and Approval

Applying for a top-up loan is often a faster, more straightforward procedure since your lender already has the important documents they need to process your application.

However, if you have had the loan for years, you may be asked for some updated documents. Processing your application, though, won’t likely be a problem, particularly if you have been diligent with your payments and have a good credit score.

The delay will only be minimal as well, which will be based on how fast you comply with their requirements.

Because of the faster processing time, you will get the amount you need within a shorter period.

Additionally, you will spend less time preparing the necessary documents and worrying whether your application will be approved or not.

3. Higher Principal

Top-up financing usually comes with a higher loan amount since it often goes up to the difference between the original sanctioned principal and the outstanding loan amount.

When you apply for a loan against your credit card, the principal you will be offered will be based on the remaining credit.

If you have been using your credit card a lot lately or have a large debt, the amount you will get won’t be a lot.

If you need a large amount of money, your chances of getting it is higher with top-up financing, especially if you have already repaid a substantial proportion of the original loan principal.

4. Longer Loan Term

The tenure of top-up financing typically depends on the payment term of the existing loan.

For instance, if your loan term is 10 years, this is the minimum period you will also be given to repay your top-up loan. However, this can even be longer based on the offer of the lender.

Many lenders can give you a loan term of 15 to 20 years, making it more convenient for you to make your monthly payments.

Additionally, the lender can also offer a longer tenure based on other factors, such as your age, income, credit history, profile, and the market value of your property, if you have a home loan.

If you opt for a credit card loan, the longest term you will likely be offered is five or seven years. If you want a longer payment tenure for your additional funds, you will do well to go for top-up financing.

5. No Restrictions Regarding Use

Another noteworthy benefit of getting a top-up loan is that you can use it for any reason.

You can use the money you get to meet any funding requirements, whether it is for personal or business reasons.

Whether you are planning your wedding, interested in buying a car, paying for your children’s school fees, or renovating or updating your home, you can use the money you get from your loan. In this way, top-up financing can be treated like a personal loan.

If you are an entrepreneur, you can invest the money to start your first business or augment the funds of your company. A top-up loan can help you in various ways, from getting your supplies and paying the deposit for your premises to refurbishing your office or sponsoring an event.

A top-up loan is also ideal for emergencies since it can be approved quite quickly. Its fast disbursal ensures you get the money you need for any unexpected expenses, including health and medical-related ones.

It is also an ideal solution if you have to pay for emergency repairs for your car.

The ease of getting a top-up loan and the success of having the amount you specified disbursed in the shortest time possible depends greatly on how diligent you are with your loan payments, which also affects your credit score.

As such, when you have a loan, be a responsible borrower since you can take advantage of top-up financing when you find yourself experiencing a monetary shortfall.

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