Dubai borrowers can choose between top-up or personal loans

Many people sometimes need extra money after taking out a loan for things like home renovations or medical expenses. You can either apply for a new personal loan or choose to get a top-up loan on your existing loan. But which choice is better? A top-up loan helps those who already have an active loan. Financial expert Rupesh Naish says this option is often preferred because it usually offers a lower interest rate. Top-up loans are also processed faster since the lender already knows your financial history. They often provide longer repayment terms, leading to lower monthly payments, or EMIs. However, top-up loans can be harder to qualify for compared to personal loans. They usually have interest rates similar to your original loan. Personal loans tend to be easier to get but come with higher interest rates and stricter repayment terms. Naish notes that banks typically approve top-up loans only for customers with good repayment records and credit scores. Taking a top-up loan can reduce your equity, which is the difference between your property's market value and what you owe on it. For example, if you have a Dh6 million home loan and want to borrow an extra Dh500,000 for improvements, a top-up loan makes it easier and quicker to get the funds you need. To qualify for a top-up loan, you usually need an active loan with the same bank, have made significant repayments, have a stable income, and maintain a strong credit score. In conclusion, a top-up loan can be a smarter choice if its interest rate is lower than that of a personal loan. But you need to make sure you can handle the increased monthly payments and maintain a good credit score. Always borrow only what you need and be aware of the risks of missing payments. Planning ahead is crucial, no matter which option you choose.