Home Improvement Loans: Everything You Need to Know About

Transforming your home into a more lively and elegant living space is a dream for all. Who does not like to modify their living spaces into something worth coming back to every single day? Nothing is better than having your home reflect your personality and style. For this, renovating and refurbishing your house is the perfect option to go for. But completely modifying and rebuilding your house’s aesthetics requires huge amounts of funds. 

It becomes difficult to save enough money in a short period of time if you wish to renovate your house. So, to help ease off things for you, going for a house improvement loan will be the best option to opt for.

What Is A Home Improvement Loan?

A home improvement or renovation loan is the type of loan one can avail of when they wish to renovate, modify or refurbish their house. It is different from a home loan. 

While a home loan allows you to purchase a house, a house improvement loan helps you improve and modify your existing home. This loan helps modify your home at really low and reasonable costs. It is a flexible and hassle-free means of transforming your home into a comfortable and elegant living space. 

Types Of Home Improvement Loan

There are two types of home improvement loans- secured home improvement loans and unsecured home improvement loans.

Secured Home Improvement Loan

This type of new home renovation loan is also known as a second mortgage loan as it keeps your house as a guarantee or collateral. You will be granted higher loan amounts by going for this type of home improvement loan. The interest rate on this loan amount will be fixed and tax-deductible, depending on factors like your age, health, size of your house, credit rating, and location. You will have to repay in 10 to 15 years. 

Unsecured Home Improvement Loan

This type of loan is riskier for the lender as it does not involve keeping the home as collateral. The rate of interest charged on this small loan amount is high, and the loan needs to be repaid in less than ten years. Your credit history is a huge factor in determining this loan, and the rate of interest is not tax-deductible. 

Benefits Of A Home Improvement Loan

Applying for house renovation finance can help you fulfill your life-long wish of living in your dream home. It helps you spruce up your apartment and make it a place worth coming back to every day. A home improvement loan covers all the costs needed to modify as well as refurbish your house, making it all new and sparkly. Some of the other benefits you will enjoy by applying for a house improvement loan are:

Lower Rates Of Interest

Many people go for personal loans to renovate their homes even if the rates of interest are high. A home improvement loan has been introduced to help them save a buck load of money. This loan charges lower rates of interest than other types of loans. 

1. Speedy Processing

It takes comparatively lesser time to process a home improvement loan. This is because only a handful of documents are required to approve this loan. The documents required are:

1. Application form filled properly
2. Last six months’ bank statements
3. Identity proof
4. Income proof
5. Residence proof
6. Employment proof
7. Photographs
8. The original title deed of your property
9. A cheque for the processing fee
10. Architect’s/ Engineer’s estimate of the renovation
11. No-encumbrance certificate
12. Tax Benefits

Applying for a new home renovation loan can help you enjoy tax benefits on the interest paid. According to Section 24, an amount up to Rs. 30,000 can be deducted annually against the interest paid on the amount of loan borrowed. 

Pros And Cons Of A Home Improvement Loan

Pros

1. Renovating your house properly can increase the market value of your house, making it more attractive and desirable to other people. So, a home improvement loan that helps in making repairs and upgrades to your property can be beneficial.
2.  A home improvement loan can increase the value of your home at such a speedy rate that your house will be eligible to pay for itself.
3. By going for this loan, you will not have to save enough money to bring about urgent repairs to your house. You can immediately leap onto it and save your house’s condition from worsening.

Cons

1. Hiring inadequate workers to renovate your house can make the loan go down the drain as your home value will deteriorate. 
2. Due to the fluctuating economy, interest rates can increase in the long run. This can make you spend more on the house in the future than you wanted to. 

Make sure to read this article until the very end, as we have provided all the information that is to be known about home improvement loans.