17 AUGUST, 2022

If you have been planning to renovate your home but are finding it a challenge due to a lack of funds, you should consider a home renovation loan. A home renovation loan will provide you with the necessary funds to carry out repairs and improvements or to give your home an entirely new look.

Getting a home renovation loan is now easy. The process to avail the loan is fast and requires minimal documentation. Furthermore, top banks and other financial institutions offer loans at attractive rates, making loans affordable for everyone. However, before applying for the loan, you must consider certain things. In this article, we will highlight some tips to help you to get your home renovation loan in an easy and hassle-free manner.

Make a proper budget

To start with, you need to determine the funding you need. Next, evaluate the kind of renovation work that is required. Are you planning a complete makeover of your home? Or do you need to carry out painting or plumbing work? Identifying your exact needs will help you determine the amount of funds required. This will ensure that you do not apply for excess funds or take an amount that does not meet your renovation needs.

Check whether you are eligible for the loan

Before you avail a loan, you must check whether you are eligible for it. Every bank or NBFC has a certain set of criteria and will only approve the loan if you meet their criteria. The eligibility criteria usually include the borrowers’ income, proof of address, age, employment, credit score, etc. Banks and NBFC’s mention the eligibility criteria on their websites and you can check the websites of various lenders and see whether you fall within their criteria.

Check the interest rates

Banks and other financial institutions are offering home renovation loans at attractive rates. But every lender sets a different home loan interest rate. That is why it is necessary to do a thorough background check. Compare the interest rates of various lenders and choose the one that is suitable for you. But besides an attractive interest rate, you also need to consider the repayment tenure, and whether there are any miscellaneous charges involved. There is no point opting for a loan with a low interest rate if it comes with excessive charges or the repayment period is not convenient for you.

Check your CIBIL score

Whether you apply for a home renovation loan from a bank or any other financial institution, your credit score is the first thing that your lender will consider. A credit score is a three-digit number and ranges between 300 and 900. It gives the lender an accurate idea of your credit worthiness. A higher score offers the borrower a better chance of getting a loan. Lenders usually give loans to people whose credit score is 750 and above because they feel confident that the borrower will be able to repay the loan. On the other hand, a low credit score will make it extremely challenging for you to get an approval. In addition, a higher credit score also helps you avail other benefits like a lower interest rate. So, take appropriate steps to keep your credit score healthy.

Choose the repayment tenor wisely

The repayment tenure of home renovation loans is long and convenient. You can choose a tenure of up to 30 years. When choosing a repayment tenure, take into consideration other financial commitments. you can opt for a short-term or long-term tenure depending on your financial situation. With a short-term tenure, you will repay the loan early. However, the EMIs will be higher. On the other hand, with a long-term tenure, the EMIs will be smaller and affordable. But you will have to pay them for a longer period of time. So, keeping all factors in mind, choose the tenure that is best for you.

Your documents need to be in order

Correct documentation is of utmost importance when applying for the loan. These documents include personal identification, proof of address, KYC, bank statements, etc. Ensure that you have all the documents and that they are in order. The documents are mandatory and every lender will ask for them. Missing or incorrect documentation may lead to a rejection of your home renovation loan.

Conclusion

A home renovation loan is one of the best ways to raise funds. You can use the money to renovate or repair your home. But before applying for the loan, it is necessary to do a thorough background check. Compare the home loan interest rates of each lender, repayment tenure and documentation required. It is also crucial to check your financial commitments and determine a reasonable budget. This will ensure that you do not face any issues later.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.