Top-up loan on a home loan
A top up loan is an additional amount you can avail on your existing home loan. This amount can be offered to you once you have completed paying few emi's in the existing loan since the lenders can then evaluate your repayment track and if any defaults. So accordingly they then disburse and additional amount of loan called a top-up loan. Since you have already started repaying your loan, your outstanding loan amount with the bank has begun decreasing. This in a way increases your eligibility.

Utilising a top up loan
A top up amount can be used for any purpose , it helps when one is in urgent needs of funds.The purpose of a top-up loan may not necessarily be for your home. You can use the funds for anything - a car, education etc.. It is almost like a personal loan, except that it comes with better interest rates. The interest rate is usually offered as per the existing home loan rate which is much lower compared to a personal loan rate.

Eligibility
You can take a top up only when you have an existing home loan running to top up on. The conditions for top up loans vary from bank to bank. You need to approach the same bank in which you took your home loan. If your bank does not offer you the option, then you could shift the home loan to a bank that is willing to give you a good deal on the top up loan. Banks check your repayment track, outstanding loan amount pending with the bank,market value of the property and your financial ability to repay the top-up amount.
In fact the upper limit on the loan amount is defined based on these aspects. It is always ensured that the outstanding loan amount you owe the bank plus the top up loan does not increase beyond about 70 per cent of the market value of the property. Also, each bank will have its own upper limit and the loan amount will be restricted accordingly.

Hence it is wiser to take a top -up loan if you require that excess funds instead of applying for a personal loan where you could be paying a higher interest rate.And to avail a top-up loan it is much simpler and hassle free as you do not have to go through the whole process sanctioning a fresh loan..