Irrespective of how big or small a home renovation project may be, it costs a pretty penny. Most people think of getting some sort of a loan to finance such renovations. For a while now, Rajiv Talreja had been mulling on redesigning his home interiors. He had bookmarked some designs and layouts he chose. But, financing it was becoming a challenge. He knew that like all major financial decisions, it would help to know the different options available at hand to make a wise financing choice.
Use 0% or Low Interest Credit Cards for Small Projects
Rajiv could avail 0% interest on credit cards — on new credit cards or checks that can be used with existing cards. A credit card could cover a small renovation or allow the purchase of raw materials but cash advances could attract charges. Rajiv considered his credit allowances and how much he could afford. He realised he could not depend on his credit cards alone for his renovation plans.
Consider Personal or Unsecured Loans for Medium-Sized Projects
After looking at his savings, Rajiv realised his cash savings were not able to cover his plans. He remembered reading in a financial article that personal loans could cover medium-sized projects. Since personal loans are easy to apply for and don’t call for collateral, they tend to offer higher loan amounts than credit cards. But it also struck him that unsecured loans could come at higher interest rates than credit cards or other secured loans.
Use Cash If You Can
Rajiv was presented with the option of cash savings, instead of relying on credit. However, he realised it could take decades before he would have saved enough cash to fund his projects. For small projects, saved cash, would be the best way to go. With this, there is no added burden of future repayments or standing collateral in exchange.
Secured Loans Against Property
Not wanting to go for an unsecured loan for a large scale project, he asked around about a loan against property. Loan against properties or cash-out refinances offer attractive rates. Additionally, Rajiv could claim the amount paid as interest as tax deductions under section 80C of the income tax act, 1961.
Home Equity Loans
A home equity loan, also known as term loan, a second mortgage or equity loan, is an additional loan availed by an existing housing loan borrower. The borrower lends the additional amount to the existing home loan holder after considering the equity of the house. This loan could allow Rajiv to borrow a fixed amount and pay back a fixed amount over a period of time. A 15-year term is typical, but with some lenders he could get a tenor of as short as five years or as long as 30 years.
To Sum Up
After considering all options and consulting with financial experts, Rajiv realized that his home renovations required money that was difficult to raise using his savings. A personal loan on the other hand could simplify his home renovation needs. You too can renovate your home using any of the loans.