Renovating a house can often be a headache. You need to get approval for constructing a room or renovating the balcony. You would need an estimate of the cost involved. Arranging the funds can really be a hassle, especially if you were not ready for it. Thanks to a home renovation loan, the job can be done with much more ease these days.

Both banks and non-banking finance companies (NBFCs) like Bajaj Finserv extend this loan to customers. All you need to do is submit the approved plan to the bank along with the rough estimates. You could get financing for up to 85% of your need. Yes, just like your home loan.

Picking the right scheme

If taking a loan to carry out renovation is your way forward, you have a choice. You can extend or top up your existing home loan. Or, you can opt for a fresh home renovation loan. There are hassles involved in the process. You need to submit the required documents. The sanction of the loan is at the bank’s discretion. That is why many people opt to extend their home loan. Are you torn between the two? A closer look at the details can help you make an informed decision.

Closer look

Home renovation is a broad category. Are you considering painting your house or making a kitchen cabinet? It will not automatically qualify as home renovation. Banks usually do not consider these as genuine home renovation needs. So, you will have to turn to NBFCs like Bajaj Finserv for Personal Loan.

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But say you are planning to construct a new room or a balcony, and already have a home loan. Simply approach the same bank with the requisite documents. As in the case of a home loan, you receive finance for up to 85% of your requirement. In some cases, the bank might inspect the site to assess your need. Only then will it extend the loan.

Tax benefits

Home improvement could include remodelling, painting, and internal and external repairs. It would even cover bigger construction work, such as adding a floor. Under Section 24 of the Income Tax Act, the interest paid on the home improvement loan is tax deductible up to Rs 30,000 per annum. This applies to both the owner and co-owner. But the deduction is part of the overall tax benefit of Rs 1.5 lakh. The processing fee for such loans generally ranges between 0.5% and 1% of the loan amount. There is no penalty on pre-payment of these loans. Moreover, the Reserve Bank of India has specifically instructed banks not to charge any customer who wishes to foreclose the loan.

Cash for personal requirements

But topping up your existing home loan can be more rewarding. This holds even though most banks charge interest rates higher than 12%. You can borrow up to a maximum of Rs 10 lakh under this. The tenure will be the balance payment period of your existing loan. You can also use the cash for your own requirements, which you cannot with a home renovation loan. If you are constructing or remodelling your house, you will get tax benefits just like in renovation loans.


Both renovation loans and home loan extensions have their merits and demerits. They offer tax benefits and relatively lower interest rates. You can pick either based on your specific need.

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