Which Personal Loan is Best for Home Renovation?
Which Personal Loan is Best for Home Renovation?
When planning a home renovation, one of the biggest worries is how to fund the project without touching your savings. Whether you want to upgrade your modular kitchen, rewire electrical systems or use eco-friendly paints, the right loan can make all the difference. Home improvement projects like structural upgrades or major repairs require a lot of funding. For instance, Amit and Reena, a salaried couple in Pune aged 30-34, had a renovation budget of ₹3.4 lakh but didn’t want to exhaust their savings. Instead they explored various loan options to fund their home renovation expenses.
If you are in a similar situation, this guide will help you understand which loan is best for home renovation and home renovations in general. We will explore different financing options, highlight each loan variant and help you choose the one that suits your affordability and lending criteria.
How to Fund Home Renovation Expenses in India: 3 Loan Options to Choose From
When it comes to funding home renovation, you have three main loan options. Submitting a proper loan application is essential for each loan type as it ensures you meet the eligibility criteria and provide all necessary documents for approval. Each loan option has a loan agreement that outlines the terms and conditions, including interest rates, EMIs and other factors. Also, you need to consider the processing fee which is a non-refundable charge levied by banks to cover the cost of evaluating and approving your loan application. Each option also has different repayment tenure choices, secured loans and top-up loans often have a longer repayment tenure making them more attractive for borrowers who want lower EMIs and more flexibility. Let’s take a look at each to help you decide.
1. Personal Loan
A personal loan is an unsecured loan, meaning it doesn’t require collateral. This makes it a good option for small to medium sized renovation projects. Personal loans are known for their easy eligibility criteria and quick loan disbursal, often within 24-48 hours when applied online through loan apps after basic KYC and eligibility checks. The personal loan application process involves submitting your details, uploading necessary documents and waiting for approval which is usually fast and simple.The personal loan interest rate starts from 19% per annum and is based on your credit score, income and lender’s policies. The loan tenure is 12-36 months, so you can choose a repayment schedule that fits your monthly budget. Fixed monthly instalments (EMIs) make financial planning simple and stress free. You should also consider the personal loan processing fee which is a one-time charge by the lender to cover the cost of processing and sanctioning your loan.
The biggest advantage of a personal loan for home renovation is its flexibility—there are no end-use restrictions, so you can use the loan amount as you see fit. Personal loans have competitive interest rates in the unsecured loan segment and the entire process can be completed in just a few clicks, offering convenience and speed. Many lenders now offer instant personal loan options, providing immediate access to funds for urgent expenses. Here’s how a personal loan works: you apply online or offline, meet the eligibility criteria, submit your documents, get approval and receive the funds directly in your bank account, often within hours.
2. Home-Renovation Secured Loans
If you have a bigger renovation budget, a housing loan or housing loans for home renovation might be a better option. These types of secured loans are backed by your property as collateral, which generally results in lower interest rates compared to unsecured personal loans. The loan tenure is longer, typically 5-15 years depending on the lender and your creditworthiness.
To get such a loan you will need to submit a housing loan application. The approval and disbursal process for secured loans is slower as it involves property valuation, legal verification and end-use documentation. Home loan eligibility plays a crucial role in determining the loan amount you can qualify for, as lenders assess your income, credit score and repayment capacity.
While the loan amount sanctioned can be higher, these loans have end-use restrictions, meaning the funds can only be used for home renovation purposes. When you pay EMIs, each installment consists of principal and interest components and the structure of your repayments will include both principal repayment and interest over the loan tenure.
Pros of housing loans for renovation include higher loan amounts, lower interest rates, longer repayment tenures and tax benefits on principal and interest payments under various sections of the tax code.Another similar secured loan option is a Loan Against Property (LAP). Unlike a home-renovation loan that restricts the use of funds, LAP allows you to finance various needs using the loan amount secured against your property.
3. Top-Up on Existing Home Loan
For homeowners with an existing home loan and a good repayment history, a top-up loan can be a good option. It allows you to borrow additional funds over and above your outstanding home loan amount. The interest rate on a top-up loan is generally the lowest among the three options, making it cost effective.
The tenure of a top-up loan is same as the remaining tenure of your home loan with the option to extend based on lender’s policies. Since your KYC and collateral is already on file, loan approval and disbursal is faster than a fresh secured loan. The sanctioned loan amount is credited directly to your bank account, so you get quick access to funds.
However, eligibility for a top-up loan depends on your repayment capacity and outstanding principal amount. The loan amount is capped by the loan-to-value (LTV) ratio and end-use restrictions may apply. You should submit the correct loan documents for approval and applicants should read all loan documents carefully to understand the terms and charges involved.
Eligibility & Documentation When Applying for a Personal Loan for Home Renovation
Before applying for a personal loan online or offline, understand the eligibility criteria and required documents. Most financial institutions have similar requirements but eligibility criteria may vary based on the loan variant you choose:
• Age and Employment: Eligibility depends on the borrower’s age and employment status. Both salaried and self-employed can apply but documentation differs. Use an online personal loan eligibility calculator to check your chances before applying.
• Income: Lenders prefer your total EMIs not to exceed 40–50% of your net monthly income, so your repayment capacity is sufficient.
• Credit History: Good credit history with timely repayment of existing loans improves your loan approval chances and can get you better personal loan interest rates.
• Documentation: Standard documents are PAN card, Aadhaar card and address proof. Salaried applicants need to submit recent salary slips and bank statements, self-employed need to provide income tax returns (ITRs) and bank statements. Review all required loan documents carefully before submission to understand the terms and charges.
Use an EMI calculator or loan EMI calculator to calculate your monthly instalments based on your loan amount, tenure and interest rates for better financial planning.
Note: Additional charges like stamp duty may apply on your loan agreement depending on state regulations.
Best Finance Option for Home Renovation
There is no one answer to which loan is best for home renovation. It depends on your loan eligibility, repayment capacity, timeline and risk appetite. For most mid-sized renovation projects with short timeline, a personal loan based on unsecured credit is the most practical option. It offers fixed EMIs, no collateral required and fast loan disbursal with minimal paperwork. Personal loans are also very flexible and can be used as an emergency loan for urgent or unexpected financial needs like medical emergency. They can be used for various purposes like home renovation, medical expenses and other personal requirements. In case of medical emergencies, quick access to funds through personal loan ensures you can manage urgent medical expenses without delay.
Always borrow only what you truly need for your renovation to maintain financial freedom and avoid unnecessary debt. Use tools like personal loan balance transfer or home loan EMI calculator to manage your outstanding loan amount and repayment schedule efficiently.
Hero FinCorp for example offers instant personal loans online with competitive interest rates and minimal processing fees so you can transform your living space without delay. You can apply for a personal loan online in just a few clicks and start your home renovation project soon.
Frequently Asked Questions
Is personal loan faster than secured loans?
Generally yes. Since personal loans are unsecured, they skip the lengthy valuation and legal verification process and hence faster loan approval and disbursal. However timelines may vary based on documentation quality, credit history and lender policies.
Will personal loan affect my existing home loan?
Taking a personal loan does not affect the terms of your existing home loan. However ensure your combined EMIs fit comfortably in your monthly budget to maintain financial stability.
How do I decide on personal loan tenure for home renovation?
Choosing the right loan tenure depends on your preferred monthly EMI amount. Shorter tenure means higher EMIs but less total interest payable and longer tenure means lower EMIs but more total interest. Use an online loan EMI calculator to decide the right balance based on your monthly budget and repayment capacity.
Disclaimer: The information provided in this blog post is intended for informational purposes only. The content is based on research and opinions available at the time of writing. While we strive to ensure accuracy, we do not claim to be exhaustive or definitive. Readers are advised to independently verify any details mentioned here, such as specifications, features, and availability, before making any decisions. Hero FinCorp does not take responsibility for any discrepancies, inaccuracies, or changes that may occur after the publication of this blog. The choice to rely on the information presented Here is at the reader's discretion, and we recommend consulting official sources and experts for the most up-to-date and accurate information about the featured products.
