Top-Up vs Personal Loan vs LAP: Decision Matrix by Use-Case and Cost

Financing needs are not all the same. Price, tenure, and paperwork should match the use case.

What Each Product Is

• Top‑up loan: Additional borrowing on an existing mortgage. Secured, usually cheaper than a personal loan. Tenure can align with the home loan.
• Personal loan: Unsecured and quick. Costlier and shorter tenure. Prepayment charges are common.
• LAP (Loan Against Property): Secured against property for business or large needs. Tenure is long but processing is heavier.

Decision Rules

• Renovation, education, medical where you already have a home loan: Use a top‑up if pricing is at least 200 to 400 bps lower than personal loan and tenure matches the asset life.
• Short and small ticket needs: Use personal loan only if you can clear it well before tenure. Avoid 5 to 7 year personal loans.
• Business expansion or large consolidation: Consider LAP for lower rates. Keep LTV conservative and protect the home.

Cost Hygiene

• Compare EIR not just the quoted rate. Account for processing fees, insurance bundling, valuation, and legal charges.
• Read prepayment and foreclosure clauses. Many unsecured loans have 2 to 5% charges.

Tools

• EMI Calculator: Compare cost across products and tenures.