The loans options you are most likely to encounter

Pure home renovation/ home improvement loan- (secured or unsecured)

Banks/NBFCs actually have loans specifically for repairs, remodelling, extensions and refurbishments. These may be as a stand-alone “home improvement” loan or as a “top-up”/add-on to an existing housing loan (secured). Use this when the project is medium to large in size (₹2–15+ lakh) and you want lower interest than a personal loan or credit card. Kotak, SBI, HDFC and others list renovation/home improvement products specifically.

Unsecured Personal Loan

Quick, less documentation, no collateral. Interest is higher compared to secured home loans, but generally, the disbursal is quicker and amounts of up to several lakhs are common. Good for small to medium jobs, such as painting, modular kitchens, minor structural work when speed matters. HDFC, ICICI Axis show personal loan renovation offerings.

Top-up on Existing Home Loan

If you already have a home loan, then many banks provide a top-up at rates close to your home-loan rate. This becomes attractive when you need a larger sum at relatively lower cost; but you will extend your secured exposure. The top-up/renovation options are being advertised by ICICI/HDFC/ Kotak.

Loan Against Property (LAP)

If you need a large amount and can offer property-residential/commercial-as security, then LAP lends large amounts at rates between secured home-loan rates and personal-loan rates, and longer tenures. When major rebuilds are planned or when credit limits are exhausted elsewhere. Note that with higher documentation, the risk is bigger here because the property is kept as collateral.

Credit-card EMI / Consumer durable / Store EMIs

EMI-enabled cards or vendor finance are equally handy for very small work or staged purchases-appliances and furnishings-but this is often costlier. Use only when buying small-ticket items or when convenience is needed.

Ranges of Interest Rates & Repayment Terms-What to Expect in 2025

Prices vary depending on the product, lender, and applicant profile, and whether the loan is secured. Current snapshots for this market:

• Secured home/home-renovation/top-up (best case): approximately 7.45% – 9.99% per annum (large banks / NBFCs, for strong profiles / repo linked products, advertise rates/joint ranges in this ballpark, but often only as bait and switch). For example: Bajaj Finserv home-loan schemes start at ~7.45% per annum; Kotak, Tata, HDFC, and Kotak advertise home/renovation and top-up products in the high 7s to low single digits, depending on the product.
• Dedicated bank home-improvement loan (retail): ≈ 8.5% – 12% p.a. depending on bank, credit score and whether linked to repo/MCLR. SBI/ HDFC/ Kotak product pages show product-specific ranges.
• Personal loan for renovation-unsecured: ≈ 9.99% – 24% p.a. This is more spread out because many banks publish 9.99% as the starting rate for high-quality borrowers and increase with poor quality/risk. HDFC and Axis pages show personal loan renovation ranges in this band.
• Loan Against Property (LAP): About 8.5% – 14% p.a., depending on the lender and LTV.

Tenures

• Personal loans: short 12–72 months, usually max 5–6 years.
• Pure renovation/ home loans or top-ups: may have longer tenures of 5-25 years, depending upon the product and whether it is an add-on to an existing home loan. Kotak and some banks publicize up to 25 years for renovation financing.

The key cost components to watch would include the processing charges, documentation charges, legal/valuation fees for secured loans, prepayment/foreclosure charges-some lenders allow penalty-free prepayment on floating-rate home loans but charge on fixed-rate or personal loans-and EMI insurance, which is optional.

 

Eligibility & Required Documents – Standard Checklist

General Eligibility Criteria

• Age: Normally 21–65 years, with slight variations.
• Income: Minimum-depends upon the lender, but usually for salaried applicants, 6-8 months salary history or minimum monthly net income threshold; in case of self-employed applicants, 2-3 years business proof and ITRs are required.
• Credit Score: Competitive pricing generally 650+; < 650 leads to higher pricing or rejects.
• Property proof: title deed/municipal tax receipt/building plan for secured home/ top-up.
• Existing home-loan statements in case of a top-up application.

Typical document

• KYC PAN, Aadhaar, address proof, identity proof.
• 3–6 month bank statement, salary slip salaried or 2–3 years ITR and balance sheet self-employed.
• Property documents, if applicable-secured loan/top-ups/LAP.

 

Tax Treatment – Important And Often Misunderstood

• Interest component: Insofar as the loan is only for repairs, renovation or reconstruction, the deduction of interest allowed under Sec 24(b) but restricted. In case of self-occupied property, the allowed deduction for interest on a renovation/repair loan is up to ₹ 30,000 per year. (this ₹ 30,000 is a limit that applies when construction/repair is the only activity). For let-out properties different (often more favourable) treatment may apply.
• Principal Repayment: Not generally allowed under Sec 80C if loan is taken only for repairs/renovation. It is generally on purchase/ construction in the case of principal repayment.
• Practical tip: When there is a distinction on account of tax treatment, document the purpose for loan disbursement and retain the invoices/receipts for the work. Rules and interpretations are subject to change and nuanced. Always check with any qualified tax consultant or chartered accountant. Follow Income Tax FAQs / official portal for authoritative guidance.

 

Decision framework-how to choose between options

Below are 4 quick questions; ask and then map to product:

1.How much will be needed?

• Small: ₹2–3 lakh: personal loan or credit-card EMI/vendor EMI.
• Mid-segment (₹3–15 lakh): Pure home-renovation loan or personal loan. Rate comparison:
• Large: (>₹15 lakh): Top-up on home loan or LAP.

2.How soon do you need the money

• Urgent: Personal Loan Quickest, Credit Card EMI.
• Can wait: Secured top-up/home loan takes valuation/legal time.

3.Less interest or less paperwork-which do you want?

 

• The lowest interest is that it is a secured top-up/ home loan-linked product.
• Minimum paper work: personal loan, but at higher cost.

4.Do you want a tax benefit on interest?

• If so, then a renovation loan or top-up on a home loan which comes under Sec 24(b) will help you to claim up to limits for interest. Check conditions.

 

EMI Worked example (practical comparison)

Assume that renovation requires ₹ 5,00,000.

• If you borrow a personal loan at 10% p.a. for 5 yrs. 60 months, monthly rate = 10%/12. EMI formula yields the following:

EMI ≈ ₹ 10,623.52 monthly (for ₹ 5 lakh @ 10% for 60 months). Calculation done to 2 decimals — use this to compare quoted EMIs.

• If you can get a secured renovation/ top-up at 8% p.a. for 10 years, EMI will be lower monthly, but interest paid over the term may be larger-always compare total interest outgo and not only monthly EMI

 

I worked out the EMI of ₹ 10,623.52 for ₹ 5,00,000@10%/yr over 60 months. Use quoted rates from lenders to compute your exact EMI.

 

Key Lender Highlights – who to consider, quick pros/cons

• Public sector banks: SBI, Bank of Baroda Attractive secured pricing, relatively transparent processes, top ups or larger loans are good here, but slow processing at times. Example: SBI has shown competitive home loan pricing with dedicated schemes.
• Large private banks: HDFC Bank, ICICI, Axis, and Kotak. Quickened service; special renovation/personal products; online onboarding and preapproved offers for existing customers. Rate bands differ. Axis/HDFC list personal loan-renovation products starting at ~9.99%, besides special home improvement offers.
• NBFCs / Fintechs : Aggressive pricing – Bajaj Finserv, Tata Capital etc Fast disbursals; Bajaj Finserv advertises home loan starts ~7.45% for the salaried; flexible credit to self-employed but sometimes a little higher fees Look good when terms offered by banks are inflexible
• Market placesBankBazaar, PaisaBazaar-convenient for quick offer compare and pre-approved pricing; however, confirm final terms at the very least on the lender’s website.

Some Practical Negotiating and Cost-Saving Tips

1. Need to improve your credit score-pay off some card balances and avoid multiple hard inquiries. Any improvement of 30-50 points will bring down the quoted rate.
2. Avail existing relationships: An existing salary account or home-loan relationship often gets concession in rates or a lower processing fee. Banks at times give pre-approved offers to their good customers.
3. An increase in your home loan-if you already have one, that is-usually costs less than an unsecured personal loan.
4. Compare APR, not only headline rate, including processing fees, legal fees, and prepayment charges.
5. Next, consider spreading large work over time to avoid borrowing large sums all at one time. It minimizes interest if you can repay earlier.
6. Check prepayment and foreclosure rules: If you intend to pay early, then choose a loan with zero or minimal prepayment penalties.
7.  Collect vendors’ invoices and store them; use these as proof of expenditure which helps in claiming taxes and documentation for resale value in the future. 

 

Common mistakes to avoid 

• Excludes processing and valuation, in addition to legal fees that inflate effective cost. 
• Assuming personal loans will always beat secured loans, secured top ups can often be materially lower for similar amounts. 
• Overborrowing to avoid short-term cash crunch: longer tenures mean more lifetime interest. 
• Assuming principal repayment on renovation loan qualifies under Section 80C -usually it does not for pure renovation loans. 

 

Suggested quick procedure (step-by-step) 

1. Estimate true project cost with 10–15% contingency and vendor quotes. 
2. Determine preferred monthly cash flow based on what EMI you can afford. 
3. Check CIBIL score and recent credit report; clear any small delinquent items. 
4. Get quotes for three alternatives: (a) top-up on an existing home loan, (b) a bank/NBFC-exclusive home renovation loan, and (c) personal loan offers. Compare APR, total interest. Speed up the comparison by using marketplace pre-approvals. 
5. Negotiate the processing fee, enquire about prepayment charges, and confirm the tax treatment of interest with your CA.

 

 Bottom line  

• For lowest cost: prefer a top-up on an existing home loan or a secured home improvement loan/top-up if you can wait for processing and provide security — rates can be in the high-7s to low-9s for good borrowers.
•  For speed & convenience: a personal loan or pre-approved offer from your bank will be fastest, but expect higher interest, about 9.99%–24% for personal loans. 
• Tax benefit exists on the interest for renovation loans under Section 24(b) but is limited-commonly ₹30,000 p.a. for self-occupied repairs/renovation, whereas the principal repayment hardly qualifies under 80C for pure renovation loans. Confirm with your tax advisor