It’s a thought you’ve been putting off for years now but with a leaking roof above your head, it’s becoming hard to ignore. There’s no denying that home renovation is expensive and can cause a minor setback in your finances but if your house is in shambles, you have little option than to opt for one. Unless you’ve anticipated and prepared for this situation while planning your finances, you’re likely to not have enough funds saved up for this. While you can take out a personal loan to finance your home renovation, let’s understand first if it’s a good idea to opt for one in the first place.
Should You Use A Personal Loan For Home Renovations?
Whether you should use a personal loan for home improvement depends on the loan amount that you would be needing and the rate of interest at which the loan is being offered. It might be a good idea to work out a trade-off before you make up your mind about opting for the personal loan. Interest rates on personal loans can range from rates as low as 10.99% to rates as high as 33%. While a low-interest personal loan can help you cope with the sudden demand on your finances because of the home renovation, a high-interest personal loan might prove to be really costly.
One advantage of personal loans is that since they are unsecured loans, you won’t have to put up your house as collateral when you’re using the loan for home renovation. But for the same reason, they come with high interest rates and unless there’s really a need for home renovation, a personal loan will probably cost you more than it’s worth.
When Should You Opt For A Personal Loan For Home Improvement?
Many banks offer personal loans with promotional offers like 0% interest for six months etc. These kinds of loans might work out to be pretty economical but remember to check if you can make the repayments in full and on time, every time or else the higher interest rates can cause a bigger dent in your finances. As with any financial product, it makes the most sense to shop around for the best loan offers in town before settling down for one. Comparison websites show you tailor-made offers that you qualify for based on your requirements and preferences from multiple lenders so that you can pick the option best suited to you.
A Personal Loan can also come in handy when there are unexpected expenses. No matter how much you plan things down to the last detail, home renovations costs can only be tentative until the work really starts. Most contractors, plumbers and electricians will only give you an estimate-while fixing your leaking roof, your contractor might bring up something that needs urgent fixing like maybe the pipelines in your bathrooms. In order to tackle such unanticipated expenses, you may want to opt for a higher loan amount.
Here are some of the other advantages of using Personal Loans for home improvements:
Loan flexibility: You can use a Personal Loan for any purpose-whether it’s fixing your roof, kitchen remodelling or something as small as fixing windows. How you use your funds is absolutely up to you.
Fast funding: If you’re applying online, funds may become available to you in less than 48 hours from some lenders.
Alternatives To A Personal Loan:
While Personal Loans may offer a compelling option to finance your home improvement project, it may not be your only option.
Here are some alternatives to a Personal Loan to fund your home renovation:
You can also opt for a Credit Card to finance your home improvement project. If you’ve been a long-standing customer of the bank, you can negotiate with it to offer you a Credit Card with 0% APR on purchase offer. This could help you finance your home renovation interest-free. However, you must ensure that you pay off the outstanding in full before the introductory APR period expires, or else you will have to pay high interest on the remaining balance.
If you don’t want to take on debt and anticipate that you would need to undertake home renovation in the next four-six months, you can start saving cash from now. This may seem difficult at first but comes with several advantages-the most obvious being that you don’t have to pay any interest on a loan. If you’re undertaking a project that can be completed in phases, you can start the next phase when you have enough money to complete it.
When you’re shopping for Personal Loans, remember to look out for things like hidden fees, such as prepayment penalty fees or part payment fees etc. so that you don’t get nasty surprises while repaying your loan. Decide how much you really need for your home improvement and borrow only that amount instead of borrowing more than you can afford to pay back.
BankBazaar.com, India’s leading online marketplace for loans and credit cards.
Need help in calculating your EMI? Use BankBazaar’s easy Personal Loan EMI calculator.