Timely home renovations can help enhance the aesthetics of your space and increase both its value and utility. But a significant renovation project like expanding the living area or transforming an outdated kitchen demands substantial funds.
To this end, you can opt for various financing options if you don’t have sufficient ready cash with you. One such option is getting a personal loan. This is an unsecured, multipurpose loan with no restrictions on end-use and a comfortable repayment tenure. Also, some top banks offer these home renovation loans at attractive interest rates, so they are easy on your pocket.
But before applying for a personal loan for home renovations, you must consider the pros and cons to make an informed decision. Let’s explore them in detail.
Pros of Using a Personal Loan for Home Renovations
1. Quick and Easy Processing
Most banks offer personal loans via a hassle-free online application process. The online application facility provides quick processing and instant fund disbursal, allowing homeowners to obtain the money immediately. Many lenders also offer pre-approved loans to existing customers, which further accelerates the process of getting funds in your account to renovate your house.
2. No Restrictions on End Usage
Personal loans are multipurpose. You can use these funds to finance any big-ticket expense without restrictions. So, whether it’s remodeling the kitchen, upgrading the bathroom, or making multiple interior changes throughout the house, a personal loan for home renovation gives you complete flexibility to use the funds however you want.
3. No Collateral Required
A personal loan is an excellent option if you do not want to use your house or any other asset as collateral. Since personal loans are unsecured, you don’t have to provide any assets as security to avail of funds.
4. Bypass Ownership Constraints
Getting a traditional home improvement loan can be difficult if the property is not registered in your name. With a personal loan, you can bypass this requirement, as banks typically approve your loan based on your creditworthiness, income stability, and repayment capacity. It allows you to easily secure funds for home renovations, regardless of the property’s ownership status.
- Tax Benefits
You can claim a tax deduction of up to Rs. 30,000 per year on the interest paid on a personal loan for home renovation under Section 24(b) of the Income Tax Act, as long as you can offer evidence that the funds were used for the intended purpose.
Disadvantages of Using a Personal Loan to Fund Home Renovations
1. Shorter Loan Tenure
Compared to other types of loans, personal loans typically have a relatively shorter loan tenure. Most banks offer a personal loan for home renovation for a term ranging between 1-4 years. This can result in higher EMIs, particularly if the loan amount is substantial.
2. Other Fees and Charges
When availing of a personal loan, you must bear administrative charges and processing fees. While these charges comprise only a small percentage of the loan value, they can slightly increase the borrowing cost.
A Personal Loan for Home Renovation: The Bottomline
A convenient, multipurpose, and easily accessible option, a personal loan lets you finance your home renovation project in a hassle-free manner. Indeed, the pros of obtaining a personal loan to finance your home renovation outweigh the cons. That said, it is important to evaluate your requirements and compare loan offers made by different lenders to make an informed decision.