Know About the Tax Benefits of a House Renovation Loan

A house renovation loan is an effective financial instrument that allows individuals to meet their financial liabilities. This can involve renovating old residential structures, extending the building, painting a particular portion, and the like.

Individuals, who need sizeable funds for home repair work and maintenance, can apply for a house renovation loan and keep their savings intact. First, however, one must learn about the necessary features of such a credit option to maximize the benefits.

Features of a House Renovation Loan

Here are the significant features of a house renovation loan-

• Tax benefits 

Individuals renovating or revamping their houses with such a credit facility can avail tax exemption on the interest component of up to Rs. 30,000 every year under Section 24 (B) of the IT Act. This benefit allows homeowners to save substantially on the repayment. However, there are no tax benefits for borrowers on the principal amount of home improvement loans.

• Interest rates

This is one of the highlights of this financing option as the interest rate applicable against this loan is comparatively lower than other credit facilities. This is because these credits are already secured by the property itself, unlike unsecured advances.

• Affordable EMIs

If an individual obtains a loan at an affordable interest rate for an extended period, the EMIs will be significantly reduced. Consumers will pay lower EMIs than securing credit at a higher interest rate. If a borrower is a salaried employee with a limited income source, availing of a loan at a lower interest rate and affordable EMIs will be effective.

Besides, a house renovation loan usually comes with a flexible repayment tenor, ranging up to 15 years, allowing borrowers to repay conveniently.

• Easy eligibility and documentation

Every financial product comes with certain lender-specific eligibility requirements that applicants must meet. Customers can give their home an instant makeover with a house renovation loan by meeting the eligibility parameters.  

Besides, borrowers need to submit the documents mentioned below-

• KYC documents and address proof
• Bank statement of previous 6 months
• Original property deed documents
• IT return documents

Despite the availability of multiple financing options for home decoration requirements, it is best to apply for a personal loan extended by reputed financial institutions like Bajaj Finserv.

As per a recent report, customers seeking home improvement loans avail a lower percentage of credit as requested, close to around 80%. However, a personal loan for home improvement offers substantial funds making it an effective financial product. 

An Overview of Personal Loans for Home Renovation

Since unsecured loans like this do not come with an end-use restriction, borrowers can use the funds at their discretion. Homeowners need to take good care of their properties to maintain a structural and aesthetic balance. Therefore, personal loans can be an effective option to undertake complicated housing projects.

The features include:

• Substantial loan quantum

Eligible borrowers can avail of a loan quantum of up to Rs. 25 lakh at attractive personal loan interest rates and flexible tenor.

• No-end use restriction

As already stated, these unsecured financing options do not restrict fund usage. So, for instance, if an individual borrows an amount of Rs. 10 lakh for home improvement, but the renovation only costs around Rs. 6 lakh, then the borrower can keep the excess amount and use it to meet multiple other necessities.

• Flexible repayment tenor

One of the simple ways to manage debt is to select a comfortable repayment tenor. Individuals can pick a tenor of up to 5 years for personal loans. Therefore, borrowers with a limited income can opt for an extended repayment tenor and service affordable EMIs throughout the period.

However, before applying for a personal loan, individuals need to check the associated loan charges to avoid financial burden in the long run.

Eligible applicants can also avail of pre-approved loan offers on various financing options, such as business loans, credit cards, personal loans, etc. These offers significantly reduce the hassle of extensive documentation and save time. Therefore, customers can check their pre-approved offers by mentioning their essential credentials.

Exhausting your savings to finance home renovation projects can leave you burdened. In this regard, a house renovation loan can provide relief from such financial stress. Alternatively, one can also opt for personal loans to meet their requirements.

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