Personal Loan

Personal Loan or Home Renovation Loan – Which is Better?


Loans may help you make purchases, bridge a short-term cash flow deficit, or create a long-term asset like a house. Most financial firms, including banks, non-banking financial companies (NBFCs), as well as housing finance companies (HFCs), offer a diverse variety of loans to fulfil the needs of their clients. You may choose between home renovation loans and personal loans based on your individual needs. 

You often look out for home renovation loans when they’re ready to buy their first buy on your own. On the other hand, a personal loan may be the ideal answer if you need a bit more cash for a down payment.

What is a Home Renovation Loan?

You may fund your renovation work with a home renovation loan. Fixer-upper houses are often funded with a home loan that includes a loan for house repairs. The “after renovation” worth is vital in funding home repairs. 

Renovation loans are based on your home’s expected worth after upgrades. You are eligible for a raise based on the expected rise in home value as a result of the recommended repair, the loan sum, and the rate of interest.

What is the Meaning of a Personal Loan?

A personal loan is a sum of money obtained that you may use for a variety of purposes such as major buys, debt settlement, crisis needs, and so on. These loans are repaid in monthly payments spanning a few months to many years. It may take longer based on your context and payment integrity. 

What You Should Know About Home Renovation Loans Vs. Personal Loans

  1. Collateral

A home renovation loan, such as an education or a vehicle loan, is a secured loan. Banks and lending firms may take your home as security if you cannot repay a loan or other debt.

A personal loan for home renovation does not need collateral. As a result, security is not needed when taking out a personal loan.

  1. Amount at stake

Home renovation loan amounts range from Rs. 15 lakh to Rs. 8 crores. Several factors, including income, impact the capacity to repay a loan.

Personal loans are offered for sums ranging from a few thousand rupees to as high as Rs. 25 lakhs or Rs. 30 lakhs if you want something more flexible. Certain financial firms offer personal loans of up to Rs. 60 lakh.

  1. Tenure

Home renovation loans last from 5 to 30 years. Loan terms are longer because of the higher buying price of land, which aids in keeping EMIs low.

In contrast, personal loans come in lengths varying from 12 to 60 months.

  1. Payments for EMI

The fixed monthly payments paid by your lenders on a certain day each month for a set sum of time are known as EMIs. Due to the longer payback term, the EMI on a home renovation loan is cheaper than a personal loan for the exact sum. In contrast, personal loans have a shorter payback duration and, as a result, a higher EMI.

  1. Processing time

A home renovation loan usually takes 3 to 4 weeks to complete. Yet, if the needed papers are lacking or the builder lacks the required credentials, the process may be further slowed.

E-banking has sped up personal loan distribution even more. For new customers, a personal loan can be approved instantly or within minutes and given within 24 hours.

  1. Rates of Interest

The rate of interest on a home renovation loan is lower than that on an unsecured loan since it has security. Current interest rates in India vary from 6.9% to 8.5%.

Personal loans offer much higher interest rates than secured loans, ranging from 9.6% to 22% based on your unique profile. Those with low credit scores pay higher interest rates, while those with strong credit pay lower interest rates.

  1. Tax benefits

There are tax perks linked with home renovation loans that assist in lowering your income tax liability. Therefore, your loan may be repaid as per schedule by enjoying all the tax benefits of up to Rs. 1.5 lakhs per year.

As personal loans do not offer tax benefits, prepaying it in whole or part does not affect your tax planning.

What is The Best Choice?

Personal loans are ideal for modest home repair tasks that you may finish rapidly. The higher rates of interest will be less of a problem, but you will profit from an unsecured personal loan’s rapid application procedure and flexible lending terms.

Home renovation loans are ideal if you are considering big home improvement projects that will boost the value of your home. Those who have built up enough equity will profit from cheaper bond yields if the work takes longer than expected. You will also be able to take benefit of the tax advantages given by a secured loan.

In the end, both forms of loans will do the job. As a result, you’ll have to weigh the benefits and drawbacks of each to decide which option is best for your home renovation project.


A home loan is appropriate for large financial movements such as a home purchase or building, but it is not always the best option for financing a home renovation. It provides cheaper interest rates and payback terms of up to 25 to 30 years. Borrowing money is possible with a home loan and a personal loan. On the other hand, a personal loan provides a collateral-free alternative to funding home repair at fair bond yields and shorter payback durations.

If you are unable to get finance via other means, having no collateral necessary to receive a loan is an excellent option. You may also budget your monthly payment with a personal loan since it has a defined period. Do your research and discover all you need to know before applying for a personal or home renovation loan. 

If you want to know more about home renovation loans, visit Piramal Finance for related blogs and explore their products and services.