Many of us might want to make changes in our home in the form of enlarging their bedroom, carpentry work, new coat of paint or just get new furniture for the home. Most renovations will happen close to a family function when we expect a lot of guests or when the home is in a bad shape and renovations are a must. Many of the renovation activities are costly and discourage us from improving our homes. It is for this reason that people will take loans in the form of a home renovation loan or personal loan.
Disadvantages of home renovation loan
With a home renovation loan, you will get maximum of only 80% of the work estimate. Also, the loan can only be taken in the name of the owner whose name the property is registered under. This is a problem – if the property is under the name of a person who is more than 50 years old and close to retirement it will be difficult for him/her to get a loan. Their son/daughter cannot take loans for the home renovation as their names are not on the document.
Another disadvantage is that many banks do not give renovation loans to buy furniture and inspections will be done by bank officials to make sure you have not used the funds for anything else. All this can be avoided with personal loans for home renovation.
Personal loan for home renovation
A personal loan is an unsecured loan which can be used for anything. It a multipurpose loan which a person can use for any purpose with no oversight. No bank official will question you on how you have used the funds. For example, if you borrow Rs.5 lakhs for painting your home and spend only Rs.4 lakhs you can use the remaining amount for anything.
The problem of the home not registered under the name of the borrower is solved by taking a personal loan. A son/daughter can take the loan on behalf of the parents and they both can repay the loan. The only disadvantage with a personal loan is that it has a slightly higher interest rate and the loan tenure is only for a maximum of 5 years.
How to get lower interest personal loan rates
Currently the interest rate of home renovation loans ranges between 8% to 12%. While personal loans vary between 10% to 30%. Don’t get scared by seeing the 30% interest rate, the average still stands between 10% and 17%.
This high interest rate can be avoided by having a good credit score. A good credit score is one which above 750. With banks openly stating that they are willing to shave off interest rates for people with good credit score it’s time you get credit healthy.
Summary
A personal loan does have more advantages compared to a home renovation loan. It gives you that flexibility to use the funds you borrow to transform your home to the home of your dream. The only disadvantage with personal loan is the higher interest rate which can be taken care off with a very good credit score.