Imagine you are a student studying abroad by taking a student loan from India. Suddenly, you have to pay extra fees for an activity at your college. What would you do in this situation? An internship or a part-time job to pay the fees? Well, you can handle this smartly by going for top-up education loans! But what are top-up education loans? This blog explains it in detail. Keep reading!
Key Takeaways:
- Top-up education loans can be used to cover expenses that your current loan amount can’t cover.
- You can borrow a top-up loan depending on the loan amount you are eligible for, after borrowing the initial amount.
- If you’ve started repaying your loan, you can get a top-up loan equal to the difference between your current loan amount and the remaining balance.
- Top-up education loans are higher on interest rates than regular education loans, and there is no moratorium period.
- You can get a top-up loan from your existing bank or a new bank, whichever offers lower interest.
- You can also refinance your education loans to get lower interest rates.
Meaning Of Top-Up Education Loans
Top-up education loans can be used as a supplementary amount to your existing abroad education loan. You can think about a top-up loan when the education loan amount that you have already taken falls short of covering the expenses that you had not initially thought of- for example, an additional course or activity that requires X amount of fee, which is essential for your career.
A top-up loan saves you from re-applying for a new loan entirely.
How Does A Top-Up Loan Work?
Here is an example of how top-up education loans work- Suppose Namrata is eligible for an education loan of INR 75 lakhs, but looking at her educational costs abroad, she borrowed only INR 50 Lakhs at the start. After a few months, Namrata needs more money to cover a few expenses she didn’t consider initially. Since she has already borrowed 50 lakhs, she is still eligible for an education loan of Rs. 25 lakhs.
| I.e. the eligible loan amount of (Rs. 75 lakhs) – the borrowed loan amount of (Rs. 50 lakhs) = INR 25 Lakhs |
This means that Namrata can top up her existing loan with an extra INR 25 Lakhs.
What If You Have Already Started Repaying Your Initial Loan?
If Namrata has already started with the student loan repayment of the initial loan amount, of INR 50 lakhs, and until taking the top up loan amount, she repaid INR 10 lakhs. Now the outstanding balance of the initial loan amount remains INR 40 Lakhs. In this scenario, her total eligibility for an education loan amounts to 35 lakhs.
| I.e the eligible loan amount (Rs. 75 Lakhs) – the outstanding balance on the loan (Rs. 40 lakhs) |
So Namrata can opt for a student loan top up of INR 35 Lakhs.
Steps To Get A Top Up Loan
You can get a top-up loan from your existing bank which gave you the initial amount. But remember that all banks do not give education loans top-up. You should check with your lender before deciding on anything like this.
Also, some banks and NBFCs offer loan top-ups based on your GRE scores. Ensure you maintain a good GRE to increase your chances of getting a top-up.
Top-Up Education Loan Interest Rates
You need to know a lot about top-up education loan interest rates. We have listed below a few points for you:
- Compared to regular student loans, top up loans have high interest rates, you should keep this in mind.
- These loans do not have a moratorium period. Due to this, you will have to repay the increased EMIs.
- The top-up education loan interest rates can be fixed or floating, and differ depending on the banks and NBFCs.
- Your creditworthiness, GRE, university, academic record, etc., are also considered while deciding the interest rates.
Documents Required
As you’ve submitted all the documents while taking out the initial loan amount, you don’t have to submit any new documents. To be eligible for a top-up, you must meet specific rules:
- Banks might need extra collateral for a top-up loan. It all depends on your current collateral with the bank. If that covers even the top up loan amount, no need for collateral will be there.
- Now for the unsecured loans, the bank might re-check your credit score and to understand your eligibility for a top-up.
A Top-Up Loan From the Existing Lender Or A New Lender? Which Is Better?
If you are getting a loan top-up at lower interest rates from the new bank, you can go for it. We suggest that you also choose education loan refinancing for lower interest rates on the entire education loan.
FAQs
Q1. Is loan top-up a good option?
If you don’t want to reapply for a new student loan, a loan top-up might be a good option as it is just more money you take from the bank to add to your current loan amount.
Q2. Can I get a top-up education loan for postgraduate studies?
You can get a top-up loan to pay for postgraduate studies.
Q3. How does a top-up loan work?
With a top-up loan, you can borrow more money as an additional amount to your current study loan. A top-up loan of $50,000 can increase your outstanding loan from $200,000 to $250,000 if you need more money.
Q4. What is top-up loan eligibility?
Your credit score needs to be good, and you need to be ready to pledge extra collateral if your existing one isn’t enough.
Q5. What is the limit of a top-up loan?
Your top-up loan amount depends on how much money you owe and how much you’ve already repaid to the bank.
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