Any person who wishes to move into a new house or improvise their lifestyle by reforming the old home can opt for home improvement & home loan respectively.
There are many odd ways to improvise your credit score and one of them is through a home loan.
Home Improvement Loan Functioning!
A home improvement loan from Buddy Loan, also called a home renovation loan is given for renovating a residential premise.
The extent of residential home improvement could be (but not limited to) the following modifications.
- Woodwork: re-panelling, carpentry, cabinets.
- Roofing: re-laying of roof either as repair or decorative purposes.
- Tiling: re-tiling, polishing, sanitizing, re-colouring, re-laying, repairing for damages.
- Plumbing: sanitary plumbing, decorative restoration.
- Electric: re-wiring, new electrical installations.
How is a Home Renovation Loan Different From a Housing Loan?
- As the name indicates, home renovation is only for extending, renovating, re-doing, and repairing existing live-able home premises. It could involve even new construction – as long as the intent falls under the ambit of home renovation.
- A housing loan is used solely to purchase a home. The money cannot be used for refurbishing a home. This is because the housing loan company will require documents about the purchase of the home, the title of the home, registration papers, etc.
- A housing loan can also be taken for the construction of a home. The construction could take place by demolishing the existing structure on the site or constructing a new home on a vacant plot.
- A home renovation loan is a type of personal loan. It has rates of interest that are comparable to any personal loan product. A home loan is not a personal loan because the documentation required is more. A home loan is also not given upfront – instead of in phases.
When Not to Take a Home Refurbishment Loan?
- Take a personal loan for home repairs only when it is necessary.
- If the decorative renovation of the home is not for any immediate event such as a marriage, then consider using savings to renovate the home.
- A home improvement finance product is not to be used for purchasing a home or constructing a home to make it live-able. It is only to make an already accommodative, live-able home better.
The reality gets more interesting while availing a home repair loan, here is how you do it.
How to Apply For a Home Repair Loan?
- Check housing loan eligibility for home improvement finance.
- Apply for a home loan for renovation using the online application form.
- Check online home loan details on the home renovation loan product that includes tenure, rate of interest, Flexi-payment options, foreclosure charges, terms, and conditions, etc.
- Research on all the best housing loan options for home improvement before choosing the right one.
- Get all documents ready for the home finance for repair, refurbishment work.
Further, coming to the heart of the matter, credit scores determine your home loan availability.
Credit Score Decides the Availability of Home Improvement Loan
The definition of a loan is money that is given from the lender to the borrower on the trust, goodwill, and credibility that the repayment of the same amount along with a rate of interest will be made in the prescribed period.
Buddy Loan disburses home improvement loans at lower interest rates relatively with your credit history. Applying for a loan means getting into a legal contract to make prescribed payments over a specified period to be paid by a specific date each month.
To initiate a personal home loan, the borrower needs to have a good credit history and rating, without which the loan will not be processed. A credit rating depends on many factors like income, job profile and description, other loans, relationship with money lenders, repayment of cards and loans, and your bank balance.
Bad credit, on the other hand, means that the person has not been able to repay his loans or has not followed the prescribed deadline to meet the expenses.
Credit rating and credibility of a person are wholly based on how you have dealt with previous debt obligations and how well you manage the current housing loan which you are applying for.
Home Improvement Loan Affects Credit Rating
- To start with, if the loan is disbursed to any person, it means that the person already possesses an excellent credit history due to which the obligation has been given. This further provides a point up in the current credit rating of the individual.
- The time frame for which the loan is taken and even the loan inquiries are made at different lenders also affects the credit rating of any person.
- Once the loan is disbursed, the EMI tenure of the loan granted and the rate of interest are significant factors impacting the credit score. An online home loan gives benefits as per the current rating of any person, but eventually, the perks offered by the lender affects the new credit rating of the borrower.
- The reliability of timely payment of all EMIs and clearing off balances is a good sign o enhance the credit rating. An otherwise situation can harm the credibility of the home finance borrower and may hamper his future chances of retrieving any other loan or credit from the market.
- The loan amount and debt to income ratio of an online home loan application is another deciding factor that impacts the goodwill of any individual.
Settling down of old loans and debts enhances the credit rating of a person, and also one must spend quality time in keeping the credit report error-free. Not having any credit history also negatively impacts the credit report.
Also Read: How To Check Your Credit Score Online For Free With Buddy Score
Home Improvement Loan And its Best Repayment Option!
A home improvement loan is an amount borrowed by individuals from financial institutions to upgrade or repair a home. The lenders charge interest on the amount borrowed. They give the money for a fixed period.
The loan tenure may be up to a maximum period of 5 years. Buddy Loan exclusively disburses home improvement loans with lower interest rates and better repayment options.
Some lenders charge you a prepayment fee for early prepayment of your loan while others don’t. The prepayment fee on your home loan may range between 1-3% of the total amount.
Some banks fund up to 150% of the registry. While considering repayment schedules, be careful not to go for long term periods only so that you enjoy small EMIs. It might be expensive in the long run.
The following are the ways you can repay your entire loan without affecting your cash flows.
Increase The Size of EMIs
When you increase the monthly instalment to the maximum allowed, you reduce your tenure, and you save up on interest. Even when the interest rates on your home loan are increased, you should endeavour to keep the EMIs at the same amount or increase them if you can.
Use Your Savings
When the sanctioned amount is credited into your account, be cautious when spending it. If by the time you have upgraded your home, you have not used up all the Savings, then you can use the remaining amount to make a massive payment to the bank. This will reduce the amount due, and you save up on interest.
Making Part Payments
Continuous part-payments, however little, go a long way to ensure you reduce the amount of loan. When making this payment, you realize that by the end of a few years, you are done paying for the loan.
Money Saved on Tax
As you are entitled to a tax rebate when you have an existing home loan, you can use the savings to set up another source of income. This will enable you to make lump-sum payments to the bank for your home loan. In case, for any reason, you are not able to repay your home loan on time, you should talk to the bank representative so that you can discuss sufficient methods of approach.
If you are having difficulty, the bank may extend your tenure for you to repay your loan comfortably. They may also revise your interest rate if the option exists.
Prepaying Help in Repaying my Home Improvement Loan!
A facility used to repay your housing loan either in part or in full before the actual tenure of the loan is over is a prepayment of loans. This is done in case the borrower has surplus funds, and he wants to be debt-ridden. Buddy Loan disburses home improvement loan at lower interest rates and better repayment options.
Since the amount and EMI of the home loan takers are quite high with a long period, people are in a hurry to get rid of the loan and save their income for other expenses. The interest and the debt haunt them somewhere, and there is always an effort made to go for the prepayment option.
This has two sides to it. The pros of the prepayment of the online home loan are definitely good riddance and being debt-free.
- With a little bit of planning and discipline, it is not a very difficult task to curb unwanted expenses and instead pay off the debt that you already are in.
- Prepayment can be extremely powerful even if it comes in bits and pieces which have a massive impact on the online housing finance and the interest that comes with it. As and when there is an increment or a raise in the income in the employment of the borrower, he can utilize these additional resources to pay off the existing housing loan and save up better for the future.
- Eventually, prepayment leads to extra savings and better opportunities in the future regarding finances.
- It improves your credit score while decreasing your outstanding balances.
- The other option that the borrower can go with is to increase the EMI and reduce the tenure again to close the debt as soon as possible. Again, this reduces the interest payable and ends up in a profitable situation for the borrower.
Besides the advantages, there are cons to the prepayment of home loans as well.
Taxable income:
The loan was a gratifying way to evade the taxes and reduce the income tax that which would otherwise be quite high. With the prepayment option, taxable income increases, and so does the amount to be paid to the government.
So anyway, the debt comes around to be the same and out of the pocket if the borrower.
Non-Fulfilment of other goals:
When people use their savings to obtain a prepayment facility for the online housing loan, they prioritize prepayment over personal goals and other areas of life that could have been addressed.
This could lead to dissatisfaction, and the loans just don’t go away. It is still there, only a part of it is reduced by curbing one’s personal interests.
Another factor to consider is the type of MCLR – Marginal cost of funds-based lending rate, which is lower for existing borrowers compared to new ones. This facility is available only to current borrowers of the online home loan facility while it exists.
Benefits of a Home Improvement Loan
- This is a form of online home loan where the purpose is for renovation, refurbishment. A housing loan company that provides home loans generally also offers home improvement loans.
- No lengthy wait periods, no extensive documentation, no visiting banks/bank officers, no waiting for approvals. The process is completely online, transparent, and fast.
- You can check the eligibility criteria for obtaining the home renovation loan online. The results come within hours. It could be by way of SMS or an email or an executive from the bank calling up to inform. This differs from traditional loans, where the lender checks loan eligibility after a lengthy process of background verification, document validation, obtaining signed approvals from various levels of bank managers, etc.
- The creditworthiness and credit score of the borrower improves. If the borrower makes repayments on time and without delay, their credit score improves.
- Lenders charge nominal interest rates on home renovation loans. Instead of taking a personal loan and refurbishing one’s home, it is ideal for taking a home improvement loan and redoing one’s home.
This is because unlike general personal loans, home improvement loans enjoy lower interest rates. Some home renovation loan product interest rates are even comparable to the lowest housing loan interest rates.
The Difference Between a Home Improvement Loan and Home Maintenance Loan
Both are technically the same. While home improvement refers to extending the home’s capabilities, decorative value, aesthetics, live-ability, home maintenance refers to maintaining the home to make it safe to live in. Both activities improve the life of the home, increase their market value, and improve living conditions.
Therefore, a safe and secure home that is clean and tidy is not only healthy but improves overall satisfaction, fulfilment levels. A home is not just shelter; it is a refuge, a personal sanctuary, an extension of a person, a place to harbour peace, love, and good living.
To conclude, it is entirely a personal choice to prepay the home improvement loan from Buddy Loan taking the above into consideration and doing the best as per his needs.
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