When you think about home improvement or renovation the first thing that comes to your mind is funds or money. How are you going to arrange the money? Do you have enough funds to pay for renovation work? Are you going to borrow the loan from any of the bank to carry out the renovation work? Are you going to use your credit card to make the payments for the renovation work? Whatever, will be your option to carry out the renovation work, you should always compare all the factors and borrow the loan accordingly. If you will compare and consider various factors, terms and conditions of different loan such as home loan, top-up loan, credit card usage for paying renovation bills, you will find personal loan more economic and friendly. A personal loan despite the higher rate of interest is still a better option to renovate your home. Here are five important reasons one should consider while taking a personal loan for home renovation.
1. You will not use home as collateral: To borrow a loan against property or a home improvement loan you are required to give your property as collateral. But, in case of personal loan you are not supposed to give anything as collateral to avail the loan. In case if you fail to pay the EMIs or returns the loan on time, the lender will eventually foreclose the loan and cease your property. The lender has all the rights to sell the property to get its money back as you have given it as collateral. In that case, your property is at risk all the time in home loan or loan against property. But, in personal loan you will face different consequence if you fail to pay the loan rather than losing your property. Defaulting any kind of loan is not a good option, but, in personal loan you and your property is at lower risk.
2. Lesser amount as interest: Though the interest rates are higher in personal loan, still you pay lesser amount in personal loan as interest. Here, you will get the amount maximum for six years, but if you will borrow a home loan or a top-up loan for home improvement then you will get the tenure for 10 years or 20 years depending upon the tenure of your home loan. Let’s take an example to understand this better:
• Mrs. Sunita has taken a home improvement loan for 15 years @ 9.75% of Rs. 10 lakhs. Her total outgo as interest in these 15 years would be Rs. 9,06,853. But, if she will avail a personal loan for 6 years @ 12.95% for the same amount, her total interest outgo would be Rs. 4,43,436. So, you can easily figure out that taking a personal loan is better than taking a home improvement loan as it will help you in saving more amount.
3. You can borrow as much as you want: In personal loan you can borrow as much amount as you want. Here, the limit is in accordance to your monthly salary, but does not depend upon the property’s value. You can borrow a lower amount or a higher amount as loan in personal loan. There is no limit for a specific category, despite your creditworthiness. So, you can borrow a home loan as per your requirements. If you want to borrow a smaller amount you can borrow that as well.
4. Get debt free sooner: If you are not borrowing the home loan for maximum duration and availing it for just two years or three years you will get debt free soon. Besides, if you will borrow any home improvement loan you will borrow it for longer tenure, which will increase your financial liability for longer period.
5. No need of property verification: If you are borrowing a home improvement loan or home loan then you are required to get your property verified before availing the loan. The bank executive will visit personally to verify the property. But, in personal loan you are not supposed to get any verification done for your property.