Is taking a personal loan for home renovation a good idea? An explainer

With a myriad personal loan options to choose from, taking a loan is easier than it appears. There are several reasons for relying on a personal loan. Sometimes it could be for an emergency while on other occasions, one could take a loan for discretionary reasons such as buying a luxury or going on a holiday. While emergencies are unavoidable, discretionary spending can be postponed if not avoided.

There are certain expenses which are neither urgent nor completely indulgent. For instance, spending on home renovation.

Is this advisable to spend the personal loan money mounted on home renovation? Or should one take a personal loan in the first place for spending on home renovation? It is a nuanced question and can turn out to be positive or negative depending on the situation.

When loan for home renovation is a good idea

A. When it is uninhabitable without renovation: There could be a scenario wherein you have invested all your money in buying a house in your city but to make it habitable you need some basic renovation. In such a case, it is advisable to rely on a small amount of loan to make the house fit and proper to live.

B. When you are not eligible for home loan anymore: Sometimes, your home loan limit is over and the only way you can meet the deficit is by taking a personal loan.

When loan for home renovation isn't a good idea

A. When it is not urgent and renovation is not essential: Sometimes you may be buying your second house as an investment and renovating it can wait till you have adequate savings in your bank. In such a scenario, it is advisable to wait rather than rushing through your decision.

B. When you already have a huge loan liability to service: Sometimes it is not recommended to borrow any more loan when you already have a huge loan to repay. With a huge loan liability to service, taking more financial burden is not a good idea to all.

Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.

For all personal finance updates, visit here