Which Type of Loan is Best for Home Renovation?
Amit and Reena, a salaried couple aged 30–34, living in Pune, planned a home renovation to upgrade their modular kitchen, electrical wiring, and use low-VOC paint.
They planned a budget of ₹3.4 lakh but didn't want to depend on their savings. Instead, they began searching for loan options to cover home renovation costs.
If you, too, are dealing with the same thing, this guide is for you!
Let us find out which loan is best for home renovation, and learn how to select the best one based on affordability and prudent lending.
How to Finance Home Renovation Expenses in India: 3 Loan Options to Choose From
If you need funds for home renovations, here are your best options, from which you can choose a loan for home renovation:
1. Personal Loan
Best for small to medium-sized projects, a personal loan is a collateral-free credit option. It has easy eligibility, can be obtained against shorter tenure, and offers fixed EMIs, helping you manage finances stress-free.
Key Features:
• Interest Rate: Starting from 19% p.a.
• Tenure: 12–36 months
• Disbursal: Fast or instant, within 24–48 hours via loan apps after basic KYC and eligibility check
2. Home-Renovation Secured Loans
These loans are property-based and are well-suited for higher ticket sizes. You must undergo a thorough documentation process, which includes valuation, legal verification, and end-use documentation.
Another similar option is a Loan Against Property (LAP), which also falls into the 'secured loan' category. You can finance anything with the amount obtained through LAP, while for home renovation loans, you can only use the amount for the specified purpose.
Key Features:
• Interest Rate - Lower since it's a secured credit option
• Tenure - Longer, typically 5–15 years (varies by lender and the borrower's creditworthiness)
• Disbursal - Slower due to the lengthy approval process, including valuation, legal checks, and documentation
3. Top-Up on Existing Home Loan
A top-up loan is worth considering if you have an existing home loan and a good payment history. However, the timeframes are according to the lender's agreement.
Key Features:
• Interest Rate - Lowest among the three
• Tenure - Aligns with the remaining home-loan tenure and can be extended as per the lender's policy
• Disbursal - Quick, since KYC and collateral are already on file
Also Read: Apply for a Personal Loan and Use it to Renovate Your Home
Quick Comparison
Let us draw a quick comparison between all the available options and understand the reasons why several people opt for a personal loan for home renovations:
Loan Type | Pros | Cons |
| Personal Loan | • Fast access via e-KYC • No collateral • No end-use restrictions • Fixed EMIs for hassle-free finance management • Flexible tenures with faster closure options • Mobile-first journey; end-to-end digital | • Interest rates can be higher than secured options since no collateral is required • Shorter tenures = higher EMIs |
| Home-Renovation Secured Loan / LAP | • Potentially lower interest for high loan amounts • Longer tenures can reduce EMIs • Higher sanction limits possible | • Requires collateral • Slower processing, including valuation, legal, end-use checks, etc. • End-use restrictions may apply • Prepayment fees and asset risk |
| Top-Up on Existing Home Loan | • Often the lowest rate among the three • Works well if you have a strong repayment history | • Only for existing home loan borrowers with adequate eligibility • Tenure depends on the lender • Can extend overall tenure or interest • Amount capped by LTV or eligibility, and end-use conditions are possible |
Since Amit and Reena maintain a healthy repayment history with a credit score above 750, they applied for a personal loan and received approval within hours, along with favourable terms.
Takeaway - With a short timeline and mid-size loan amount requirement (₹50,000 to ₹5 lakhs), personal loans are an operational fit. For bigger expenses, a secured loan can work well, especially if you’re not in a rush and have property or assets to pledge.
Also Read: 5 Life Goals You Can Actually Fast-Track with a Personal Loan
Eligibility & Documentation When Applying for a Personal Loan for Home Renovation
• Age & nature of employment - Depending upon lender policy for self-employed or salaried borrowers. Check eligibility using an online calculator.
• Income - Conservative limit is total EMIs ≤ 40–50% of net monthly income.
• Credit history - Recent and timely payments, and judicious use of credit, contribute to better results.
• Documentation - PAN, Aadhaar, address proof; salary slips and bank statements for salaried; ITRs and bank statements for self-employed.
Also Read: Essential Personal Finance Tips for Effective Money Management
The Best Finance Option for Home Renovation
There is no best loan for home renovation; however, personal loans are the best fit in relation to your risk appetite, timeline, and size. For time-bound home renovation projects, a short-term personal loan often offers the neatest working solution. It comes with no collateral, fixed EMIs, and paperless processing.
In each scenario, guard cash flows and borrow only what the project really requires. Hero FinCorp offers an instant personal loan without any paperwork.
Transform your living space without the wait. Get a personal loan today and begin your home renovation project soon!
Compliance & Disclaimer - This article is for general information purposes and is not investment advice or a guarantee.
Frequently Asked Questions
Is a personal loan consistently quicker than secured loans?
Usually, yes, since unsecured channels skip valuation/legal verification. Timeline information is subject to documentation quality, credit history, and lender procedure.
Will a personal loan impact my current home loan?
It will not alter your home-loan terms. Just watch out if the personal loans EMIs fit within your income budget to manage finances better.
How do I decide on a personal loan tenure for home renovation?
Choosing the right loan tenure depends on how much EMI you’re comfortable paying each month. A shorter tenure means you’ll repay the loan faster and save on interest, but your EMIs will be higher. A longer tenure keeps EMIs lighter but increases the total interest cost. Use an online personal loan EMI calculator to find the balance that fits your budget best.
