Personal Loans for Home Upgrades: Are You Spending or Investing?

‘Ye sofa meri virasat mein jayega.’ 

It pains me when my ₹1.5 lakh sofa does not increase my credit score. I mean, look at the cost and investment plan behind it. 

‘Saalon saal chalne wali cheez hai!’ So, when Neeraj told me that he was redoing his kitchen, I got super excited to share the tips that will not make it to my ‘virasat’. 

I told him to take a ₹4 lakh personal loan to redo his kitchen and also add modular storage. If he was going to do something with his house after years, it had better be good and long-lasting. He said, ”Kyun befaaltu ka kharcha karwa rahi hai?” 

At that time, I said nothing, but two years later, when he sold the house, he got a profit of ₹1,53,000. It was due to the renovation that he received ₹6 lakh more than the earlier market price.

Here’s what his numbers looked like:

So, was it spending or an investment? In some cases, people tend to overdo their house, which adds no substantial value to it. To help you save your money, we will see how, using a personal loan, you can upgrade your home and its value rather than just spending it. 

Personal Loan vs. Home Equity (Secured Loan)

Personal loans are unsecured and fast to disburse (1–3 days) but have higher rates (10.3–16.7%). ‘Har koi perfect ni hota.’ Home equity loans or HELOCs are secured by your home. You give a certain equity to your lender. It offers lower rates (6.5–9%) and tax benefits under Section 24(b).

If you want to do small upgrades, go for personal loans. If you are planning high-value renovations, you can go for secured loans, but be aware of the EMIs. Your assets are more important than any money borrowed. 

For example, Rajesh is a 40-year-old banker in Chennai. He needs ₹5 lakh. He can opt for:

Personal Loan at 13% for 3 years

Home Equity Loan at 8.5% for 5 years

He compares the EMI, total interest, and tax savings before deciding. Here’s the Excel spreadsheet he used:

1. Estimate ROI First

Will you cook a dish that does not taste good? No, then why should we invest in a home that doesn't yield a good return on investment? So, before borrowing, always check your ROI. 

‘Dekho’, a ₹8 lakh modular kitchen (with a ~50% ROI), can add ₹4.0 lakh in value. Whereas cosmetic upgrades, not so much. Spending more doesn’t always mean higher resale value.

For example, Meera plans a ₹4 lakh kitchen renovation. She verified a resale gain (~70%) and expected ₹2.8 lakh in profit. She was confident that she would get every rupee she would invest, so she borrowed exactly ₹4 lakh. 

2. Compare Loan Products

‘Mummy ke saath shopping kari hai?’ She will visit dozens of shops to find the best item at the lowest possible price. They never accept the first offer they get. 

Similarly, you should compare options like a personal loan, a renovation loan, and a top-up home loan. Even a 1% rate difference on ₹5 lakh over 5 years saves ₹20,000 in interest.

For example, Priya needed ₹5 lakh for a kitchen renovation. She compared a personal loan at 14%, an HDFC renovation loan at 8.75%, and a home-loan top-up at 9.5%. She saved over ₹45,000 over 5 years, choosing the best option, the HDFC renovation loan.

Let’s see the comparison between the 3 loans with the table given below.

3. Pre-Qualify Without Impacting CIBIL

Use lenders’ pre-approval tools that perform a soft credit check. This shows loan offers without lowering your credit score. The final application triggers a hard check only if you proceed. And you know what a hard check does? Decreases your credit score!

For example, Sahil wanted a ₹6 lakh renovation loan. But his CIBIL score was just 687. He didn’t want to apply directly and risk his score with multiple rejections. 

So, he used pre-approval tools from HDFC, ICICI, and Axis. These tools only did soft credit checks. Once he saw that ICICI offered him a 10.75% interest rate, he went ahead with the formal application.

By using pre-qualification, he avoided 2 hard enquiries and protected his credit score, just look at the table below.

Conclusion

‘Ghar ka sapna toh sab dekhte hai, par agar vahi ghar aage ke sapne poore kare toh…?’

A home upgrade loan can be a wise investment if it increases your property’s value. From your end, you can compare loan types, estimate resale returns, and use pre-approval tools. With the right planning, even borrowed money can turn into a good investment.

Frequently Asked Questions

1. Is it worth taking out a home improvement loan?

Yes, if it adds value, like kitchens, bathrooms, or structural repairs. Avoid fancy décor.

2. Can a personal loan be used for investment?

Yes, but risky. Use only if the return is higher than the loan interest.

3. What is the best way to pay for home improvements?

Use savings first. Then compare personal, renovation, or top-up home loans.

4. Which home improvement adds the most value?

Kitchens, bathrooms, solar panels, and paint jobs give 60–80% resale return.

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LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?