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Renovating your home can be an exciting but costly affair. Thankfully, a Home Improvement Loan offers a smart financial solution to upgrade your living space. Whether you’re planning to revamp your kitchen, add a new room, or modernise your interiors, a home improvement loan helps you achieve these dreams without depleting your savings.

In this guide, we’ll explore the interest rates, eligibility criteria, and also the best options available for home improvement loans in India.

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Home Improvement Loan Interest Rates by Top Banks

Bank	Interest Rates	Best For
Bank of Baroda	Starts at 8.40% p.a.	Low Interest Rates
Tata Capital	Starts at 10.99% p.a	Security/Collateral
Canara Bank	Starts at 6.90% p.a.	Low Processing Fee
PNB Housing Finance Ltd.	Starts at 9.10% p.a	Higher Eligibility Criteria
HDFC Bank	Starts at 10.50% p.a.	Flexible Repayment Options

Banks Offering Home Improvement Loans

Bank of Baroda Home Improvement Loan

Best for: Low Interest Rates

• Interest rate: Starts at 8.40% p.a.
• Loan tenure: Up to 30 years
• Processing fees: Up to 0.50% of the loan amount [Min. Rs.7,500 (payable upfront); Max. Rs.20,000]
• Maximum loan amount: Rs.50 Lakhs
• Applicable for: Renovation, improvement, and also repair of an existing property

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TATA Capital Home Renovation Loan

Best for: Security/Collateral

• Interest rate: Starts at 10.99% p.a.
• Loan tenure: Up to 6 years
• Processing fees: Up to 2.00% of the loan amount
• Security: No security or collateral required
• Prepayment penalty: No penalty after 6 months for partial repayment. Also a fee of 2.00% + GST applies for prepayments exceeding 25% of the loan amount.

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Canara Bank Home Improvement Loan

Best for: Low Processing Fees

• Interest rate: Starts at 9.4% p.a.
• Loan tenure: Up to 5 years
• Processing fees: Up to 0.50% of the loan amount (Min. Rs.1,500; Max. Rs.10,000)
• Additional benefits: Can be used for purchasing furniture and also home appliances
• Prepayment penalty: No charges on loans with floating interest rates

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PNB HFL Home Improvement Loan

Best for: Higher Eligibility

• Interest rate: Starts at 8.5 % p.a.
• Loan tenure: Up to 30 years
• Processing fees: Up to 0.50% of the loan amount (Min. Rs.10,000)
• Applicable for: Complete renovation of existing property

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HDFC Bank Home Improvement Loan

Best for: Flexible Repayment Options

• Interest rate: 10.75% to 24.00% p.a.
• Loan tenure: 03 Months to 72 Months
• Processing fees (Salaried): Up to 0.50% of the loan amount or Rs.3,000 (whichever is higher)
• Processing fees (Self-employed): Up to Rs.1.50% of the loan amount or Rs.4,500 (whichever is higher)
• Prepayment penalty: No charges for individual borrowers; Also 2% penalty for others within six months of first disbursement.

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IIFL NRI Home Improvement Loan

Best for: Non-Resident Indians (NRIs)

• Interest rate: Starts at 8.90% p.a.
• Loan tenure: Up to 25 years
• Processing fees: Up to 0.75% of the loan amount or Rs.3,000 (whichever is higher)
• Prepayment charges: No charges for individuals; But up to 5% of the loan amount applies under certain conditions
• Foreclosure charges: Applicable when prepaying the loan fully

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Features of Home Improvement Loans

Before opting for a home improvement loan, it’s important to understand the key features, which are slightly different from regular home loans:

Features	Description
Loan Amount	The loan amount can vary depending on the scope of your renovation project, ranging from ₹50,000 to ₹15 lakhs or more.
Flexible Tenure Collateral Requirement	Loan tenure can extend up to 15 years While some loans may not require collateral, larger loans may be secured against the property.
Interest Rates	Rates for home improvement loans are typically lower ranging from 8.5% to 11% per annum.
Tax Benefits	Like a home loan, you can claim tax deductions on the interest paid under Section 24(b) of the Income Tax Act.

Altogether, these features make home improvement loans an attractive financing option for homeowners looking to renovate without overwhelming their finances.

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What Decides Home Improvement Loan Eligibility?

Eligibility for a home improvement loan depends on a variety of factors, including:

Eligibility Criteria	Requirement
Age	Minimum Age: 18 years Maximum Age: 65 years
Resident Type	Indian
Employment Status	Salaried Self- employed
Residence	Permanent Residence Or a rented residence where the applicant has resided for at least 12 months before applying.
Credit Score	A good credit score of at least 700 or more issued by a recognised credit bureau
Existing Debts	If you have existing loans, the lender will assess your debt-to-income ratio to ensure you can handle additional EMI payments.

Ensuring that you meet these criteria increases your chances of approval and can also result in more favourable loan terms.

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Home Improvement Loan Options in India

When seeking to finance your renovations, you’ll find several options in the market. Here are the main types of loans available for home improvement:

1. Secured Home Improvement Loan

This type of loan requires you to pledge collateral, typically your home, to secure the loan. Because, it usually comes with lower interest rates and higher loan amounts.

2. Unsecured Home Improvement Loan

For smaller renovation projects, an unsecured loan may be more appropriate. While no collateral is required, the interest rates can be higher than secured loans.

3. Top-Up Loan on Home Loan

If you already have a home loan, you can opt for a top-up loan to fund your renovations. Because, this is often quicker and easier to process, with interest rates similar to your home loan.

4. Personal Loan for Home Improvement

A personal loan can also be used for home improvement purposes. However, it usually comes with higher interest rates compared to a dedicated home improvement loan.

Each loan option has its pros and cons, so it’s important to consider your financial situation and the scope of your project before choosing the right type of loan.

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Documents Required to Apply for a Home Improvement Loan

To apply for a home improvement loan, you will need the following documents:

Eligibility Criteria	Requirement
List of Documents required from all applicants	Proof of Identity (any one): Aadhar Card Valid Driving License Voter ID Valid Passport PAN Card
Proof of Residence (anyone)	Copy of Electricity bill/Water Bill/Telephone Bill Valid Passport Aadhar Card Driving License Voter ID Card Duly filled loan application form affixed with 3 passport size photographs of all the applicants/co-applicants and signed across
Proof of Income for Salaried Applicants/Co-applicants	Salary slips or salary certificate Bank statements showing salary credits for the previous 6 months Income Tax Returns and latest Form 16
Proof of Income for Self-employed Applicants/Co-applicants	Balance Sheet and Profit & Loss account statements IT Returns and the computation of income
Proof of Income for Salaried Non-Resident Indian (NRI) Applicants/Co-applicants	Salary slips or certificates Bank statements showing salary credits for the last 6 months Bank statements of the Non-Resident External (NRE)/Non-Resident Ordinary (NRO) accounts in India for the last 6 months Consumer Credit Check Report
Proof of Income for Self-employed Professional NRI Applicants/Co-applicants	IT Returns and the computation of income for the previous 3 assessment years Balance Sheet and Profit & Loss account statements Bank statements of the applicant current NRE/NRO account in India Consumer Credit Check Report
Proof of Income for Self-employed Non-professional NRI Applicants/Co-applicants	Copy of the current valid contract Savings Proof Memorandum and Articles of Association Bank statements of the current, savings and NRE/NRO accounts in India for the last 6 months Qualification certificates IT Returns along with computation of income Balance Sheets and P&L account statements along with Schedules and Annexures
Property/Home Improvement related documents	Property/Home Improvement related documents: Original Title Deeds of the property Proof of no encumbrances on the concerned property An estimate of the improvement project received from a Civil Engineer/an Architect
Other Documents	Own Contribution proof Memorandum and Articles of Association of the Company (for self-employed) Copy of valid resident visa stamped on the Passport (for NRIs)Bank statements indicating any ongoing loan repayments for the last 6 months Bank account statements Processing Fee Cheque favouring the bank

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Home Improvement Loan Interest Rates

Interest rates for home improvement loans can vary from bank to bank. Generally, they range from 8.5% to 11%, depending on factors like your credit score, loan tenure, and also the lender’s policies. Some banks may also offer floating interest rates, which can fluctuate over time.

Essentially, you have to compare interest rates from different lenders and choose the one that fits your budget and long-term financial goals. For example, if you borrow ₹10 lakhs at 9%, your EMI could be around ₹10,000 for a 15-year tenure.

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Home Improvement Loan Myths – Busted

Myth	Fact
Only homeowners can apply for a home improvement loan.	While property ownership is required, co-owners or joint applicants can also apply.
Personal loans are the only option for financing home renovations.	Home improvement loans are specifically designed for renovations, while also offering better rates and terms than personal loans.
Renovation loans have very short repayment terms.	You can choose flexible tenures ranging from 1 to 15 years, depending on your loan amount and eligibility.

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Why Choose a Home Improvement Loan Over Other Loan Types?

Usually, a home improvement loan is tailored for renovation and comes with several benefits over other types of financing:

• Lower Interest Rates: Compared to personal loans, the rates are significantly lower.
• Tax Benefits: You can claim deductions under Section 24(b) of the Income Tax Act for the interest paid on these loans.
• Flexible Repayment: You can choose a tenure that best fits your financial situation, thereby reducing the pressure on monthly expenses.

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Conclusion

Opting for a home improvement loan is a wise decision if you’re planning a renovation and want to manage the costs efficiently. Additionally, with competitive interest rates, tax benefits, and flexible terms, these loans offer a convenient way to enhance your living space.

For more personalised advice and options, visit Credit Dharma to explore the best options available. Also ensure your renovations are stress-free with expert financial guidance.

Frequently Asked Questions