As working professionals, we all have instances when our needs and duties intersect. Your drawing room requires a new coat of paint, and your old couch can no longer withstand your weight. You have likely been wanting the latest phone or laptop with superior operating capabilities and features. Both are very desirable, but each has costs. That marks the beginning of your dilemma – which loan should you opt for, and how should you pick it responsibly?

The first thing you have to be honest with yourself about is what exactly drives your buying. A house renovation, whether it's just some touch-ups or an entire redesign, will likely affect your ultimate comfort. It will improve your surroundings and raise your market value. Just the opposite can be said about gadgets. They may be very exhilarating, but they have a very short lifespan. Their value decreases rapidly, and new ones emerge every year.

As regards financing these requirements, an average employee has access to three types of loan facilities. The first and most sought-after loan facility is a personal loan. It does not demand any collateral and can be raised for almost any reason. It provides easy approval, which works well if you have an urgent need to buy a home. But it might not be a very cost-effective option as regards purchasing a gadget.

But if your intention is specifically to buy a phone, laptop, or some appliance/electronic device, a consumer durable loan would be a more pragmatic option. It usually carries low or even zero per cent interest rates with easy EMIs that won’t burden your pockets. The retail chain usually collaborates with a lender.

Larger home renovations, such as repainting, furniture replacement, plumbing, or electrical work, may be better handled with a home renovation loan. The rates on these loans are lower than those for a personal loan, and you can borrow a larger amount. A home renovation loan might be more cost-effective if your home project is a larger undertaking.

Before making a final decision on loans, you need to assess your readiness. As a thumb rule goes, your entire EMI repayment should be within 30-40% of your monthly pocket expenses. Going beyond it may disturb your financial harmony. Also, make it a point to calculate your total existing expenses, such as credit card bills, loans, and family responsibilities. A third criterion applicable here would be your readiness with your own money. Salaried people usually maintain 3-6 months’ worth of expenses as an ultimate rainy-day fund before taking additional loans.

Also Read: Common Myths About Taking a Loan-Busted

To decide between a home renovation and an upgrade involving a device, use the following sorting method: Which option will be more useful or appreciated a year from now? A good home renovation will benefit you for several years. It will increase your convenience and safety. As for a device, it will also be helpful, but it will be obsolete soon.

Once you have your list of priorities sorted, it’s a good idea to calculate and compare the interest rates, loan terms, and associated processing charges. It’s always advisable to have shorter loan tenures if possible. Also, be sure to read all the terms carefully, as small charges can add up. Ultimately, making the right loan choice means finding a balance between your dreams and your dollars. Whether it's upgrading your home or overhauling your gadgets, make sure your loan works for your future, not just your present.