Choosing between Home Improvement Loans & Top-Up Loans

Home owners can renovate their home by taking home improvement loans or top-up loan. Both have their shares of pros and cons, so which one is actually better?

21 Feb,2018 06:15 IST 2156 Views
Choosing between Home Improvement Loans & Top-Up Loans

Your homes, just like other things in life, require regular checkups, upgrades and care. After every few years, a bit of touch-up to the paint on the walls or a makeover of the flooring or adding a new ceiling pattern is a nice way to keep your home looking new. Once a while, every homeowner likes to refurbish interiors of their home but such endeavours come with a price tag and that too an expensive one.

You can always opt for loans but getting a loan which has pocket- friendly interest rate is difficult. With time, banking sector has come up with consumer-friendly loan options which not only lower down the interest rate but also save time. If you are planning to renovate home, then you can choose from home improvement loan or a top-up loan. But before opting for either one, it is better to understand the difference between the two and how can these help you? Let’s find out.

Home improvement loans:

There are various banks and NBFCs (Non-banking finance companies) which provide home improvement loans. These loans have a low-interest rate (10.5% -11.5%) when compared to personal loans. The tenure for these kind of loan is also longer (up to 15 years), unlike personal loan which is given for a tenure of 2-3 years. Even the loaned out amount is greater than personal loan’s amount. However, these loans are given after analyzing the applicant home and by rough estimation of the cost of improvement of the home.

Eligibility criteria to apply for a home improvement loan are as follows:

  • Applicants should be at least the age 21 old and not above retirement age
  • Having a good CIBIL score is a must
  • If one doesn’t have a home, he or she can be co-applicant to improve eligibility


Top up loans:

It is very simple to understand how a top-up loan works. If a consumer has an existing home loan going on in a bank or NBFC and thinks that they need a renovation in their home but doesn’t have enough funds, then they can always go to the existing lender and apply for a loan on the existing home loan.

The rate of interest for a top-up loan is lesser to personal loan but 1-2% higher than of home loan. The tenure of a top-up loan is lesser or same as to existing loan. No extra paperwork or eligibility is required for applying for a Top-up loan.

The benefit of taking a top-up loan is that it can be used for anything like repaying a debt, personal use or child education etc.

Eligibility criteria to apply for a home improvement loan are as follows:

  • Applicant should have an existing ongoing home loan in the bank
  • Existing home should be at least a year old

But the big question is what to choose between both of them?

Everything boils down to the necessity of the borrower. If the need for the loan is to renovate the home, then the best option will be going with home improvement loan as that would provide you with a larger corpus to work with.

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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