Can I borrow more money on an existing loan?

It’s possible to top up a loan but you should consider how this will affect your finances before going ahead. For example, taking out more credit could mean you pay more interest overall. So you need to weigh up the pros and cons to find the most affordable option.

3 min read
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How does borrowing more work?

If you need extra funds, you could consider topping up an existing loan instead of taking out a second loan. To do this, you’d need to get in touch with your current provider, either online or over the phone.

By borrowing more on a current loan you’re effectively refinancing it. This means the terms of your agreement will change. The new terms depend on the lender’s criteria and your individual circumstances (which may have changed since you applied for the original loan).

Advantages of borrowing more

1. Extra funds

The main benefit of borrowing more on your loan is getting a lump sum in your bank account when you need it.

You can spend it on whatever you choose, such as home improvements or debt consolidation (as long as it isn’t gambling or anything illegal).

2. Quick decision

Topping up a personal loan with your current provider should make the application process quick and easy, as they’ll already have a lot of your details pre-filled.

Most mainstream providers say they can give you a personalised quote and decision within minutes, either online or over the phone. The funds could be in your bank account anywhere from 15 minutes to the end of the following business day.

3. One monthly payment

Another benefit is that you’ll only need to make one monthly payment towards the overall balance. This could make budgeting easier. Whereas if you took out a second loan, you’d need to juggle separate loan repayments each month.

You could also use your loan to consolidate other debts, so it can help reduce the number of payments you are having to make each month.

4. Flexible terms

Personal loans are flexible. You can agree on new terms with the lender, including how much you borrow, over how long. With Ocean Finance, for example, we can find you a personal loan up to £15,000 spread over up to 5 years (depending on your circumstances).

Disadvantages of borrowing more

1. Increased monthly payments

Increasing the amount you owe on your loan, will most likely increase your monthly payments, depending on the length of the agreement.

Before you commit, make sure you review your incomings and outgoings to check you can comfortably afford an increase in your monthly loan payments.

2. Higher interest rates

If you increase your borrowing, you will need to repay the new balance at a new interest rate, which could potentially be higher than your previous interest rate. Remember to compare the APR on different loans to find the best deal (this is the total cost of borrowing).

3. Longer repayment term

Topping up your loan can extend the length of time it takes you to pay it off. This means you could be charged more interest overall. It’s best to consider if you’ll be able to maintain your payments over the long term.

4. Potential early repayment charges

It’s also wise to check if you’ll be charged any early repayment charges for clearing your existing loan with your new loan. Your lender may also charge early resettlement interest on your original loan for it before the end of your agreement. This depends on your terms and conditions.

Do I have any other options?

You could apply for a second loan with a separate repayment agreement. You would only need to apply for a loan for the extra funds you need. This means you’ll pay your current rate of interest on your existing loan. This could potentially be a lower interest rate than if you top up the loan.

If you don’t want to add more to your loan and you only need to borrow a small amount, you could consider a credit card instead.

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