The Ultimate Guide To Home Improvement Loan

The Ultimate Guide To Home Improvement Loan

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If you are a homeowner, then you may have to take up renovation work at some point to keep your home looking new and increase its resale value. Whether it is changing the entire interior décor or fixing repairs and repainting the walls, home renovation projects can be both exciting and overwhelming at the same time.

While you may be looking forward to changing the look and feel of your home, you may be worried about the costs and expenses incurred. Depending on the extent of renovation work you want to undertake, the whole project can range from a few thousand buck to lakhs of rupees.

The good news is many lenders in India offer home renovation loans at competitive interest rates. You can apply for such loans to get the necessary cash to meet the renovation expenses without depleting your hard-earned savings.

What is a home renovation loan?

Home renovation loan or home improvement loan is a type of credit that you can borrow from any financial institution to carry out renovation work in your existing house. Whether you want to fix the leakage in the ceiling, make structural changes or repaint the outer walls, you can use the house renovation loan. You can also use the funds to buy or repair your home furniture and fixtures like geysers, air conditioners, fans, etc.

You can apply for a house renovation loan individually or jointly. If your house is jointly owned, then all the owners can jointly apply for the loan. If you are the sole owner of the home, then your family members can become joint applicants even if they are not joint owners.

Home Renovation Loan Interest Rate

When you compare home improvement loans from different lenders in India, you may consider the interest rate as one of the critical factors while choosing the lender. Today, most lenders offer house renovation loans at attractive interest rates and flexible repayment terms to suit the borrower’s requirements.

The home renovation loan interest rate varies from lender to lender. Some private lenders like Tata Capital offer home renovation loans at an interest rate starting from 10.99%. Typically, the lenders determine the interest rate based on your credit history, the amount you want to borrow, the loan tenure you choose, age, financial stability, and credit score.

Steps to apply for home renovation loan

Just like home renovation loan interest rate, the procedure to apply for a home improvement loan differs from one lender to another. However, most lenders have the following process.

Step 1

The first step isdetermining the amount you need. Based on the quotation you get from the contractor, determine the maximum amount you want to borrow so that the EMI is affordable and suits your budget.

 Step 2

Once you have a fair idea of the amount you want to borrow, check the eligibility criteria of different lenders and see if you meet their requirements. Also, you must narrow down the lender based on the simplicity of the application/approval process, home renovation loan interest rates, disbursal time, etc.

Step 3

Submit the home renovation loan application along with the necessary documents to the lender of your choice. You can apply for the loan online or offline. While filling out the application form, you must be careful and fill out the details in the relevant sections.

If you are applying for the loan online, then make sure to double and triple-check the form before you submit it. Even a small mistake can lead to loan rejection.

Step 4

After you submit your house renovation loan application and the necessary documents, the lender will start the process of approving the loan and verifying the documents. Through this step, the lender confirms your repayment capacity.

Step 5

Once the lender finishes the background check, and if they are satisfied, then they will ask you to pay the processing fees.

 Step 6

When you pay the processing fees, the lender starts the home improvement loan approval process. At this stage, the lender approves or rejects your loan. If your loan application is approved, then the lender will send you a formal sanction letter. The letter will contain the details of the approved amount, interest rate, tenure, EMI, etc.

Step 7

If you agree with the loan terms, then you must sign and submit the sanction letter to the lender within a specific period. The lender will then draft a detailed home loan document, which you must sign.

Home improvement loan uses

Whether you take a personal loan for home renovation or avail a house renovation loan, you can use the amount for any renovation works like

   Kitchen renovation or remodelling the kitchen

   Adding a new room/bathroom or extending the room in your existing home

   Change or redo the interior decoration of one room or the entire house

   Buy new furniture or change the furniture and fixtures

   Replacing the doors and windows

   Installing a modern home security system

   Fixing the cracked and broken flooring or roofing system

Home improvement loan costs

When you availa house improvement loanyou may have to bear certain additional costs. These are listed below.

   Processing fees – As the name suggests, processing fees are charged to process your loan application.

   Document verification fees – While some lenders charge separate fees for verifying the authenticity of the documents you submit, others include the cost in the processing fees.

   Prepayment fees – If you want to prepay or repay the loan before the end of your actual tenure, then the lender may charge prepayment fees. It is usually a percentage of the amount you prepay.

Conclusion

Applying for a home improvement loan is a great way to get the funds for carrying out renovation work in your house. Lenders like Tata Capital offer home renovation loans at attractive interest rates and have simple eligibility criteria, allowing you to get the desired funds without any hassles.

But it is paramount that you read the loan terms and conditions carefully before you sign the dotted lines to avoid any legal hassles in the future.

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