About 833 million people, accounting
for 69% of India's total population, live in rural areas. Out of this, 75% have
a monthly income of less than Rs. 5,000. About 51% of them make their living
through annual labour and 70 million do not have access to socio-economic
benefits.
According to The Times of India, a
vast majority of the population still lives in per capita space of equal to or
less than 10x10 feet. This space is not just used for living but also for
sleeping, cooking, washing and toilet needs. It comes down to 103 sq feet of
space per person in the rural areas and 117 sq feet in the urban parts.
Although cities have slightly better
facilities, not even a single city provides 24-hour water supply to its
citizens and about 400 million people do not have proper toilets. With an
estimation that 7 in 10 people living in cities by 2050, this poses a serious
threat and home improvement
loans are your best option to ensure that you kids grow up in a healthy
environment.
Here are a few things you should
consider before opting for such loans.
It is for Improvement and Not Addition
A home improvement loan is sanctioned
for repair work that needs to be done and not to buy new items like furniture
or kitchen equipment. It can be used to fix a leakage in the pipes, paint the
walls, etc. In simple words, it is for the purpose of renovation. Therefore,
read all the fine print on the application form thoroughly before signing it.
The Amount of Money to be Borrowed
Usually banks in India pay up to 80%
of the total cost of renovation. You can calculate the total expenditure using
a home
improvement loan calculator.
It is easier to acquire if you are already a home loan customer of a bank.
Eligibility Criteria
Just like other types of loans, your
monthly income, age and credit history decide the amount that a bank will be
ready to lend. If you already have a home loan which is 6-12 months old, you can
approach the bank for an improvement loan too.
Benefits over Personal Loan
Unfortunately, a majority of the
people in India are not aware of this product and thus opt for a personal loan
instead. However, unlike a personal loan, an improvement loan allows you to
extend the repayment tenure up to 15 years from 7 years, which means you have
to pay a lesser amount as EMI.
Interest Rate and Processing Fee
The interest rate for this product is
between 9.5% to 11%, while the processing fee can be anywhere between 0.5% to
1% of the loan amount. It varies from lender to lender.
Tax Exemption
Up to Rs. 30,000 is exempt under
Section 24b of the Income Tax Act, but limited to home loan exempt of Rs. 2
lakhs.
There are no prepayment charges for this type of loan and you can choose between fixed and floating rates of interest. So, learn about the amount you need and the EMIs you are likely to pay for it using a home improvement loan calculator and make an informed decision to make your house a better place to live in.
