Buying your dream house is one of the biggest achievements in your life. It bestows a sense of identity, status, and pace. Renovating your home is a great way to add an aesthetic and soothing ambience. You can add a new room, change the interior, or completely repaint your house. However, home renovation does not come inexpensive. It can put a burden on finances if not managed well.
However, you can apply for home improvement loans f you do not have other means to manage your finances. With a home improvement loan, you can cover the cost of modifications and remodelling without touching your savings or investments. You can conveniently convert your home into a peaceful and more comfortable space for yourself and your guests.
Benefits of home improvement loans
A home improvement loan comes with several perks you can avail of to renovate your home. For instance, it enables you to access funds based on the value of your home and cover the cost of repairs and renovations, such as paintings, waterproofing, tiling and flooring, plumbing, and sanitary work.
Here are the perks of home improvement loans:
Higher loan amount
The best part about a home improvement loan is that you can get a higher loan amount based on the market value of your home. For instance, if your house is valued at Rs. 50,00,000/-, you can get up to Rs. 30,00,000/- as a loan. A higher loan amount means that you can cover all the costs of the renovation. However, it is worth noting that a higher loan amount leads to higher interest rates due to the risks involved.
Quick application processing
When you apply for home improvement loans, you will have to furnish minimum documents, which significantly reduces the processing time. It means that your days of standing in long queues to apply for a home renovation loan are long gone. You will need to visit your lender’s web portal, fill in your application, upload the relevant documents, and submit your application. Depending on your application, you can get approval within just hours of submission.
While applying for a loan, make sure to fill in your details correctly. You will need to fill in your personal, employment, and financial information. You will specify the loan amount and the loan tenure you need. If everything is in proper order, you will receive the approved loan amount in your bank account.
Attractive interest rates
A home improvement loan is a type of home loan that offers affordable interest rates compared to unsecured loans. The benefit of lower interest rates is that they can significantly reduce your EMI amount, enabling you to make timely repayments without any burden on your pocket.
The interest rate depends on factors, such as your age, income, credit score, current financial obligation, relationship with the lender, location of your home, and repayment tenure. Your lender decides an interest rate based on the said factors.
Minimum documents required
As mentioned earlier, there are minimum documents required to apply for a home improvement loan. Although the documents required vary from lender to lender, here are the ones that are common across most online platforms:
- Identity proof: Aadhaar Card, PAN Card, Voters ID Card, Driving License, or Ration Card.
- Address proof: Passport, Aadhaar Card, PAN Card, Driving License, Ration Card, or Utility Bill.
- Age proof: Driving License, Voters ID Card, Passport, Aadhaar Card, or Birth Certificate
- For salaried individuals: Salary slips, ITR, or form 16
- For self-employed individuals: Bank statements (past 3 months)
- Property title deed
- A passport-sized photograph
Tax benefits
Another benefit of home improvements loans is that you can avail of tax deductions under the Income Tax Act 1961. As a home loan borrower, you can get tax benefits of up to Rs. 30,000/- per year for the interest payable on your home improvement loan. It should be noted that the tax deduction falls within the limit of Rs. 200,000/- interest payments on your home.
So, you can get tax deductions of Rs. 200,000/- on the interest paid on home loans and home renovation loans. But, you are eligible to secure up to Rs. 30,000/- as tax benefits on your home improvement loan. Availing tax benefits significantly reduces the overall cost of borrowing.
Conclusion
If you want to renovate your house and you do not have any other means to manage your finances, opting for a home improvement loan may be the best option available. However, you must assess your needs and monthly budget before applying for a loan. You should conveniently make repayments with your monthly salary.