Repeat and Top-up Loans: Everything you need to know

This week we’re going to be looking at repeat loans and top-up loans. We’re going to look at the basics (like what even is a repeat loan?) and the differences between top-up loans and repeat loans and the benefits of applying for both. And, as always, it’ll all be free of complicated jargon or finance lingo.

As everybody knows, sometimes even the best-laid plans and budgets have to change and adapt to unforeseen circumstances and events.

Sometimes, it’s your car breaking down unexpectedly.

Sometimes it’s a change of career or position.

Other times, you are presented with an opportunity to invest or spend money -- like, for example, extending or renovating your home -- that wasn’t an option a little while ago.

Whatever the reason, life can throw you curveballs that mean you have to regroup or give you chances to make a decision that could be fruitful a little further down the line.

And in both cases, sometimes that decision means that you need to borrow more money.

But it’s a common misconception that if you’ve already got a loan (or had a loan recently), you wouldn’t be eligible to borrow again, especially if you haven’t finished paying off your existing debt.

That’s where repeat loans and top-up loans come into play.

Repeat loans and top-up loans can help you borrow the money you need, often at a better rate than you qualified for before.

But we’re getting ahead of ourselves here, let’s start with the basics, shall we?

What is a repeat loan?

A repeat loan, as the name suggests, is another loan taken out with the same lender. This is usually done as a new loan application at the end of your repayments.

In other words, a repeat loan means borrowing more money from a lender you have a previous relationship with.

And what is a top-up loan?

A top-up loan is a little different. It’s a way of borrowing extra money while you’re paying off the first loan.

For example, let’s say you’ve borrowed £3,500 over 3 years and have made regular, on-time repayments for the last six months.

After those 6 months, you decide that you want to upgrade your car or decorate your house and need to borrow an extra £1,000 to make that happen.

With a top-up loan, you can add £1,000 to the balance of your first loan and pay that extra £1,000 off alongside your existing debt.

How do top-up loans and repeat loans work?

This is a great question.

Repeat loans are processed just like any other loan. You decide how much you want to borrow, go through the application process and -- if you’re approved -- get the money in your account.

A top-up loan is a little different, however.

Technically, the top-up will be a new loan that clears the amount you owe on your previous debt and tops it up with the additional amount you want to borrow.

To make it a little clearer, let's go back to our previous example: you’ve paid 6 monthly repayments on your £3,500 loan and now owe around £3,000 plus interest.

If you then wanted to borrow an extra £1,000, we would always assess your circumstances to ensure you would be able to afford the extra debt.

If so, we would then calculate exactly how much money you need to settle your first loan and offer you a new loan - made of the amount needed to pay off the first loan plus the amount you want to borrow.

Then, the settlement amount would be automatically used to close the previous loan and only the top-up amount -- in this case, £1,000 -- would be sent to your account.

Why would somebody apply for a repeat loan?

This is a great question.

Repeat loans are a great option for people who want to borrow again and who want to use a lender they already trust.

Like we said earlier, this could be for maintenance repairs, an investment in their home or because they’ve found that borrowing another amount would let them pay off some of their more expensive existing debts at a better rate.

In fact, one of the big advantages of repeat loans is access to better rates.

If you’ve previously applied for a loan with a lender, you’re probably eligible for lower rates because you’ve got an established relationship and have repeatedly demonstrated that you’re somebody who makes on-time repayments.

As such, it’s likely that the lender will offer you better rates on the new amount you’d like to borrow.

Who is eligible for a repeat loan?

Eligibility criteria differ from lender to lender, but at Bamboo we double-check your repayment history and your personal situation to see that you can afford the new loan. In other words, we run all regular checks that we normally do for new applications... and then some! (We’re a responsible lender and wouldn’t want you to borrow money you can’t afford.)

What about top-up loans? What are the benefits of top-up loans?

Because a top-up loan pays off your existing loan and gives you a new, slightly larger loan, they’re a great way of getting access to additional funds without taking on an additional line of credit.

It also allows you the opportunity to negotiate new payment terms on your new loan, whether you want to pay it off quicker, or spread the costs out a little.

(Of course, the exact repayment plan you’ll be offered will be based on your needs and circumstances.)

Are top-up loans and repeat loans for everybody?

As with all forms of lending, top-up loans and repeat loans aren’t for everybody.

While they can be great at giving you a little boost or helping you get the money you need at a better rate, they are, of course, an extra source of debt.

If you’re not 100% sure that you can afford a repeat loan or a top-up, or you think your circumstances might change so that the repayments would be a problem, then they’re probably not the right options for you.

To read about other forms of borrowing that might suit you and your circumstances better, make sure you check out the Bamboo Blog.