Emergency scan come in many shape and form. Do owning a home is not an emergency but home repair can be an unexpected cost. Not just repairing, maintaining a good home is also an important task. At such times home renovation loans can be of great help.
In this article we discussed home renovation loans and how they can help you to furnish your home.
Understanding home repair loans
Essentially home repair loans are to personal loan or a top up on your existing loan which can be used for any purpose of your choice. It is a practical financial solution for home owners looking to renovate, furnish, repair or maintain their home. The loans can be secured from different sources including banks, nbfc and housing finance companies.
Key features of home repair loans
When considering house renovation loans, it’s essential to understand their key features:
- Tax benefits: Under Section 24(b) of the Income Tax Act, interest paid on a home renovation loan can be claimed as a deduction, subject to certain conditions.
- Flexible terms: Lenders in India offer flexible repayment terms, letting you select a plan that fits your financial situation. This flexibility makes it easier to manage the repayment process without causing undue financial stress.
- Variety of loan types: Home renovation loans come in various forms, such as personal loans, home improvement loans, and lines of credit. Each type has advantages and can suit different financial situations.
Steps to prepare for unexpected repairs
While having access to home repair loans or top up loan for home repair is essential but you also need to be prepared in advance for unplanned expenses. You can check the following list to take some proactive steps –
- Build a fund: In the case of unexpected repairs, it is best to have a dedicated emergency fund. Save at least three to six months’ living expenses in an accessible account. This fund can serve as your first defence against sudden repair costs.
- Understand your insurance coverage: Review your homeowners’ insurance policy to understand what damage and repairs are covered. This knowledge can help you avoid unexpected expenses and protect yourself.
- Research loan options in advance: Research various loans to fix houses and lenders before an emergency arises. Knowing your options in advance can save valuable time when you must act quickly. Compare multiple lenders’ interest rates, fees, and repayment terms to find the best choice for your situation.
- Monitor your credit score: Maintaining a high credit score can help you secure better loan terms. Regularly check your credit report and address discrepancies to maintain a strong credit profile. A good credit score can lead to favourable loan conditions and lower interest rates.
Applying for an emergency home repair loan
When an unexpected repair occurs, you must apply for home renovation loans. To ensure a seamless and effective process, follow these steps:
- Assess the degree of renovation: The first step is to assess the extent of the renovation needed. Get an estimate from a reputable contractor to determine the cost. Understanding the scope and price will help you apply for the appropriate loan amount.
- Gather necessary documentation: Lenders will require documentation to process your loan application. This documentation may include proof of income, a list of assets and liabilities, and details about the renovation. Having these documents ready can expedite the application process for your house renovation loan.
- Compare lenders: Take the time to compare interest rates, fees, and repayment terms from multiple lenders. This comparison will help you find the best loan option for your needs. Consider traditional lenders (financial institutes and housing finance companies) and NBFCs, who may offer more competitive rates or flexible terms.
- Submit your application: Once you have a lender and with the required documentation, submit your application. Be accurate and thorough to avoid any delays. Once approved, thoroughly examine the home renovation loan agreement to ensure all the terms and conditions before signing.
- Use funds wisely: Once you receive the loan funds, use them specifically for the purpose. Maintain thorough documentation of all related expenses for future reference. This documentation can be helpful if you need to prove how the funds were used or if there are any discrepancies with the contractor’s work.
Alternatives to home repair loans
While home repair loans are a valuable resource, there are alternative options to consider as well:
- Loan Against Property (LAP): LAP allows you to borrow against the equity in your residential or commercial property. This loan offers substantial money, with flexible repayment terms and competitive home loan interest rates.
- Personal loans: They are unsecured loans, meaning you do not need to provide collateral. Many financial institutes and NBFCs offer personal loans with quick approval and disbursement, though the interest rates might be higher compared to secured loans like LAP.
- Top-up loans on existing home loans: If you have an ongoing home loan, you can seek an additional top-up loan from your current lender. Top-up loans typically offer more competitive interest rates than personal loans and can be repaid over the remaining tenure of your home loan.
- Credit cards: Using a credit card might be a viable option for more minor repairs. Some credit cards offer promotional 0% Annual Percentage Rates (APR) periods, allowing you to finance the repair interest-free if you can pay off the balance within the promotional period.
- Government programs: The Indian government offers various schemes and provideshome repair loans, especially for low-income households. Pradhan Mantri Awas Yojana (PMAY) is an example of a government scheme that offers financial assistance for housing improvements and repairs.
You must take an informed decision regarding financing your home renovation depending on your financial situation.
Conclusion
Home renovations and repairs can be stressful and financially burdensome, but house renovation loans provide a vital safety net. By preparing and knowing your loan options, you can confidently handle these challenges and protect your home investment.
By leveraging home loans for extension and other resources offered by Tata Capital, you can keep your home safe, secure, and well-maintained, even when unexpected repairs arise.
To learn more, check the Tata Capital website or download the app.
24 September 2024
6 mins read
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