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Understanding the Difference between a Home Loan and a Home Renovation Loan
Posted on Thursday, July 11th, 2024 | By IndusInd Bank
To finance your dream home, it is essential to understand the different loan types available. Two common options are home loans and home renovation loans. While both serve the purpose of improving your living conditions, they cater to different needs and come with distinct terms and benefits.
Let’s understand the differences between the two and check which one is the ideal option for you.
Key Differences between Home Loans and Home Renovation Loans
The below table illustrates the major differences between the two types of loans:
| Points of Difference | Home Loans | Home Renovation Loans |
| Purpose and Use | It is used to buy a new house or property. It covers the cost of buying a residential property, which includes the land and the building. | It is a type of personal loan designed for financing home renovation projects. This could include structural repairs, remodelling, or upgrading the interiors of an existing property. |
| Loan Amount | It is higher because it covers the entire cost of the property. You can get significant financing based on the property value and eligibility. | The amount is lower when compared to home loans since it is only used for financing home renovation. It can depend on the extent of the renovations needed. |
| Interest Rates | Home loan interest rates are lower compared to other types of loans because the property secures them. These rates can be fixed or floating. | Interest rates for home renovation loans can be higher than home loans, but are still competitive. |
| Tenure | Home loans can have longer repayment tenures, ranging from 10 to 30 years. This is because of the higher loan amount. | One of the benefits of home renovation loans is their shorter tenure. It can last from a few months to a few years, meaning you can repay the loan faster. |
| Approval Process | The approval process for home loans can be more extensive. It can involve property valuation, legal checks, and more stringent eligibility criteria. | The approval process for home renovation loans is quicker and simpler. It focuses on creditworthiness and the scope of the renovation project. |
Also Read: Essential Criteria for Qualifying for a Personal Loan
Should You Opt for a Home Loan or a Home Renovation Loan?
Choosing the right loan depends on your circumstances and financial goals.
You should opt for a home loan if:
- You are purchasing a new property.
- You need a large loan amount.
- You prefer lower interest rates and longer repayment tenures.
A home loan is a suitable choice if you are looking to buy a new home and need funds for the same. You can also spread the cost over a longer period with manageable home loan interest rates.
You should opt for a home renovation loan if:
- You want financing options for home renovations on existing property.
- You need a smaller loan amount.
- You prioritise a quicker loan process and flexible repayment options.
A home renovation loan is ideal if you already own a home and want to make improvements. It provides the funds you may need to upgrade your living space. One must also consider the benefits of home renovation, such as increased property value or improved living conditions.
Conclusion
While home loans are suitable for purchasing new properties, home renovation loans are suitable for improving existing homes. Each comes with its own set of terms, benefits, and interest rates.
IndusInd Bank offers Personal Loans for Home Renovations so that you can transform your abode into a personal sanctuary. With competitive interest rates, best-in-class features, and a simple application process, IndusInd Bank has got you covered!
Apply for a Personal Loan with IndusInd Bank now and take the first step towards your dream home!
Disclaimer:
The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.
