Should You Use a Personal Loan for Home Renovations?

Currently, home improvement ranks high on the wish list of numerous homeowners, with more than 60 per cent planning to utilise their checking or savings accounts to cover such projects in 2023. Although various borrowing options exist to finance these goals, not all options are created equal.

Determining the ideal fit for your requirements will rely on several factors that need to be compared. While your initial inclination might be to use your home equity through a home equity loan or line of credit, there are instances where a personal loan could prove to be a superior choice.

Is Using a Personal Loan for Home Improvements a Good Idea?

When deciding whether obtaining a personal loan for house construction is financially viable, several factors need consideration. Evaluate the scope and cost of your project along with the amount of equity in your home. Additionally, weigh your comfort level between secured and unsecured borrowing. Another crucial aspect is to compare fixed versus variable interest rates, predictable versus flexible dollar amounts, repayment terms, and potential tax benefits.

For smaller or medium-sized projects like room makeovers or installing new windows, using a personal loan for home improvement can be an excellent choice. However, determining if a personal loan suits your specific needs requires a careful comparison of the financial advantages and disadvantages in relation to your unique situation.

Before applying for a personal loan to fund your next project, it's essential to be well-informed about the benefits and potential downsides involved in this financing option.

Pros Of Getting a Personal Loan

Like with any form of debt, it is crucial to comprehend the advantages of a personal loan for home renovation before moving forward with the application process. Here are the key aspects you should be aware of before finalising the agreement.

Flexible Use

Personal loan providers usually don't require you to state the specific purpose of the borrowed funds in advance. This flexibility means you can apply for funding without having a finalised plan for the money's use. Nevertheless, there are some common and popular benefits of obtaining a personal loan, including:

Minimal Documentation and Easy to Avail

Personal loans offer substantial advantages when it comes to minimal documentation requirements. Lenders typically ask for just three documents, and the entire process can be conveniently completed online. Furthermore, the application process is designed to be straightforward and user-friendly, focusing on customers' convenience.

Build a Decent Credit Score

If your credit history is less than satisfactory, you may explore the option of applying for accessible personal loans and commit to timely repayment. This stands as one of the most substantial advantages of a Personal Loan. By doing so, you can gradually improve your credit score, making it more convenient to apply for future loans with more favourable interest rates.

Fixed Rate of Interest

One of the advantages of a Personal Loan is the ability to choose your desired repayment tenure. The interest rates remain fixed throughout the entire loan duration, ensuring they remain constant. Your primary responsibility is to ensure timely repayment of the loan, and in most cases, you don't need to worry about any fluctuations or adjustments in the interest rate.

No Collateral Required

One of the most significant benefits of utilising a personal loan for home renovation is the absence of collateral requirements. This implies you don't need to pledge your home or any other asset as security to obtain the loan. This can be especially advantageous for homeowners who lack any form of guarantee to secure a loan.

Quick Disbursal

Obtaining pre-approval for a personal loan is usually a quick process, and meeting the eligibility criteria is key to expediting the approval. A good credit score certainly offers an added advantage. The disbursal time may differ depending on the bank or lender, but it typically occurs within 24 hours, and in some cases, it may take up to 72 hours at most. This makes it an ideal choice for emergencies when you require rapid access to funds. Moreover, if you are an existing customer of the bank you are applying to, you might even be eligible for instant online approval, further speeding up the process.

Longer Loan Tenure

In contrast to a personal loan, a Home Renovation Loan or Top-up Home Loan offers a longer loan tenure of up to 15 years. This enables you to select a tenure that aligns with your repayment capacity and reduces your monthly EMI burden.

No Upfront Costs

When obtaining a home loan, you might need to independently finance a portion of your home improvement project. However, with a personal loan, there are usually no upfront costs, making it a more affordable choice for homeowners facing budget constraints.

Improves Your Home Value

Engaging in home improvement projects can be beneficial if you plan to sell your property in the future, as it can enhance its value. By utilising an instant personal loan to fund your home improvement project, you can make these enhancements without depleting your savings.

Conclusion

There's no need to shy away from considering a personal loan, even if you have some emergency funds saved up. Personal loans can cover a wide range of expenses, from medical procedures for a loved one to financing home improvement projects.

To make an informed decision, it's essential to research the specific amount of money you require and compare the various lenders available to you. By doing so, you can pave the way for a better future for yourself and your family. Taking the time for well-researched decisions will also improve your chances of securing the loan, so avoid rushing into anything.

Additionally, you can use an online EMI calculator to determine the monthly instalments you'll need to pay for a particular loan amount. This will aid in better financial planning and management.