House renovation on cards? All you need to know about a home improvement loan

We all have heard of the popular saying, ‘Ghar zindagi mein ek baar hi banta hai’. But as the years pass, you house may be a victim of seasonal wear and tear as any other asset. And to keep your house in a good condition, you may require to renovate it.

The only drawback associated with the renovation of a house are the high costs linked to it. Now, in this developing world, you no more need to wait to save or collect enough funds to be able to remodel your house. You can always opt for a home improvement loan.

What is a home improvement loan?

Home renovation loans, usually referred to as home improvement loans, are made available to customers looking for money to renovate, repair, or upgrade their residential property. Home improvement loans are available to both new and existing home loan borrowers. This facility is offered by the majority of banks, non-banking financial institutions (NBFIs), and housing finance companies (HFCs), either as part of their standard house loan product or as a distinct offering under the more general category of home loans.

What are the types of home improvement loans?

A secured home improvement loan and an unsecured home improvement loan are the two different types of loans available for house improvements.

Your home serves as collateral for a secured home renovation loan. The advantages include the ability to borrow more money with a fixed interest rate and a repayment period of 10 to 15 years. Additionally, the interest paid on this mortgage is tax deductible. The interest rate is influenced by a number of variables, including your age, health, region, property size, and most crucially, your credit score.

Unsecured House Improvement Loans are riskier for the lender but not the borrower because your home is not used as a guarantee. They must be repaid in 10 years or less and are often smaller with a higher interest rate. This kind of loan's interest rate is not tax deductible and heavily influenced by your credit score.

Who is eligible to take a home improvement loan?

1. The applicant must fall within the age range of 18 and 65.
2. They can be a resident or non resident Indian.
3. The applicant can be salaried or self- employed.
4. Applicants must have a primary residence or a rental where they have lived for at least a year prior to applying.
5. They should have a favorable credit rating of at least 700 points, or more, from a reputable credit bureau.

What are the banks providing good interest rates on a home improvement loan?

Note: The above data has been taken from Bankbazaar.

Bank of Baroda and Canara Bank are among the top two banks which provide home improvement loans at an interest rate of less than 7% p.a. HDFC bank closes near to 7.55% with an additional perk of flexible repayment options.

You may spend as much or as little on home upgrades as you choose, and they can range from adding an addition to changing cabinet hardware. Before you apply for a loan for a major project, attempt to estimate the project's entire cost if you're thinking about getting a home renovation loan.