Everyone has a dream of owning their own house. And upon buying one, the next step is to renovate as per your requirement. When you buy an individual house or flat from a builder, they will not get customization done as per your requirement unless and until you construct on your own by hiring personal developer. The main objective of builder is to deliver home as per their construction plan and not yours. So for house improvement as per your requirement additional money would be needed. Or if you’ve been staying in your own house for years and want to change look and feel and want to arrange money for the same, what will you do? Of course you can turn to your relatives and friends, but they all have their own financial commitments and they may not offer you a support.
So what will you do in such a situation?
Personal loan for renovating house comes to your support offered by most of the financial institutions in India such as public, private, or co-operative banks, housing finance companies, or peer to peer lending companies.
What does home renovation include?
Improving your home includes but not limited to the following:
- Remodeling the house
- Repair – internal and/or external
Let’s get into the details for getting finance for home improvement:
Listed below are the basic eligibility criteria set by lenders for getting credit for home furnishing or decoration or renovation:
- Ownership: The most basic requirement is that the loan applicant should be the owner of the house/flat. You cannot take personal loan for house renovation, if the property belongs to someone else. For e.g. tenants are not eligible. But at the same time tenants can take loan for purchasing furnishing or decorating items.
- Property documents: Lenders will also ask for original documents related to the concerned property.
- Credit Score: Irrespective of the type of credit you apply for, every lender will first take into consideration the CIBIL rating. It is a score given to every borrower out of 900 depending on his/her credit usage. According to CIBIL, any individual with a score of 750 and above is more likely to get credit approved. Higher the score, higher the chances of loan or credit card approval. If your CIBIL score is low, then still there are lenders such as co-operative banks and peer to peer lending companies who can offer you the loan.
- Profession: Salaried, self employed or businessman are eligible for the loan. If you do not have any source of income but own a home then getting a loan is difficult. This is because lenders won’t be able to calculate your loan repayment capacity.
- Annual Income: The most important decisive factor for evaluating credit worthiness of any individual. Although there are personal loan for low income earners but it has its own pros and cons. In order to reduce non-performing assets, banks take multiple factors into consideration and amongst them annual income is the most important. Every lender has there own monthly or annual income eligibility criteria.
- Employment history: Work experience and years being in the same job is also taken into consideration by some lenders.
- Age: Minimum age of the applicant should be 21 years.
Who offers financing for improvement of home?
Following three categories of lenders offer loans for renovating house:
- Banks: Public, private & co-operative. Almost every bank offers this loan.
- Finance companies: HDFC, Bajaj Finserv & others
- Peer to Peer Lenders: Lendbox.in, LendenClub & others. More about P2PL here.
Below table shows loan details from few lenders:
|Lender's Name||Monthly Income Required||Interest Rate||Loan Amount|
|Kotak Mahindra Bank||Minimum Rs. 25000||11.49% - 20.15%||Rs.20Lacs - Rs.75Lacs|
|Bajaj Finserv||Minimum Rs.30000. But varies between cities||11.99% minimum||Upto 25 Lacs|
|HDFC||NA||9.40% - 9.90%||Rs.30Lacs - Rs.75Lacs|
|IndusInd Bank||Minimum Rs. 25000||11.25% minimum||NA|
|Indian Overseas Bank||NA||9.50%||Rs. 25000 - Rs. 15 Lacs|
|Axis Bank||NA||9.45% minimum||Minimum Rs. 3 Lacs|
|DHFL||NA||Based on DHFL's retail prime lending rate||Maximum Rs. 50 Lacs|
|PNB Housing||NA||9.40% - 10.40%||Rs.20Lacs - Rs.75Lacs|
|Bank of Baroda||Minimum Rs. 50000||Base rate 9.60%||Minimum Rs. 50000|
Note: Please check with the above listed companies and get latest details on interest rate, loan amount and other criteria.
Every loan you take will carry basic charges such as processing fees, interest rate, late payment, cheque bounce, prepayment, loan type conversion. But remember there could be other charges involved which lenders may not disclose clearly initially but are present in the documents provided by the lender.
Although personal loan is costliest loan type but it is most preferred as collateral is not required. Moreover applicant has to go through less tedious documentation and disbursement is fast.