Every home needs a retouch over the period of time. No matter how well you maintain your house, there’s always a few wear and tears. Home repairs and renovations can be a costly affair and sometimes, they fall on your lap out of the blue and you are left with no choice but to take care of them. You may not be prepared financially to meet such an unexpected expense. That’s when loan seem to be a good option. But what to consider, a top up loan or a personal loan? Let’s understand this better.
Top Up Loan for Home Renovation
You can avail a top up loan if you are already serving a home loan or a personal loan. top up loan is a credit available to you over and above your existing loan. You become eligible for a top up loan once you have served your existing loan for a certain period. The terms and interest rates differ from lender to lender. The important factor considered by the lender is your creditworthiness and your repayment capacity.
Top up loans, like personal loans, can be used for varied purposes. They are a good option because of the flexibility of end use they offer. However, you can get a top up loan only if you have not exhausted you credit limit on the already serving home loan. It usually takes 2 – 4 working days for the approval provided you meet all the terms.
Personal Loan for Home Renovation
Personal loan is preferred choice for home renovation as they are easier to avail, plus they don’t come with conditions of having to serve a home loan first. You don’t need to pledge any collateral to avail a personal loan unlike in a top up loan, where your home loan agreement acts as a collateral. Other important aspect is the interest rate; for top up loan, you may have to pay 1 – 2 % higher interest than the home loan rates.
Personal loan interest rates are offered on the basis of your credit history and may vary from bank to bank. Also, the borrowing amount for top up loan may be limited to your home loan limit; it may also keep changing based on your repayment track record and market value of your house. But personal loan can be availed for a smaller amount like Rs. 50000 to bigger amount like Rs. 25 lakhs. The offer and approval are based on your credit history and income. Top up loan tenures can be longer viz. 10 – 15 years as per your home loan agreement. Personal loans can be availed for only 3 to 5 years.
Home renovation is an important financial decision. It is prudent to always evaluate your pros and cons before making a decision to apply for a loan. Check out your eligibility for a personal loan online on MYFI too.