Worried how big a hole the fancy sofa set is going to burn in your pocket? Or the big-screen TV and chandeliers you have been planning for your new home?

Don’t worry. It’s time to pamper yourself.

A move-in can cost a fortune, but banks and housing finance companies are ready to fork out the money to help you furnish your home after your heart.

They are offering home improvement loans, which can either be clubbed as a top-up with the loan to buy a new house or flat or taken as a stand-alone loan.

State Bank’s Sumit Ghosh says the “cost of furnishing and consumer durables” can be included in the cost of buying a house or flat. Those who want to “club it” with the home loan will have to give an estimate of the furnishing cost along with the home loan application. “We’ll disburse the loan on the basis of the total project cost (cost of the house plus furnishing),” he says.

The estimate need not be endorsed by a certified architect. It’s only when a loan is taken for renovations that an architect’s estimate is needed. Otherwise, the borrower has to just mention the furniture he intends to buy.

There’s a limit, though. The maximum furnishing loan, says the assistant general manager (personal banking), is Rs 3 lakh or 10 per cent of the total project cost, whichever is lower.

Other public sector banks also offer furnishing loans that can be included in the home loan. The limit ranges between Rs 3 and 4 lakh. “When a person buys a house with a loan, he or she is already nose deep in debt. It is often very difficult for borrowers to dig out another few lakhs to buy even the minimum accessories to make the house or flat liveable,” Ghosh explains.

“We want to give our home loan borrowers a respite by providing a top-up loan that will not be heavy on their pockets. Hence the home furnishing loan, when taken with a home loan, has been capped at Rs 3 lakh.”

Those who have taken a home loan from another bank, Ghosh says, can take a consumer durable loan or personal loan from SBI to deck up their nest.

But there’s a catch. The interest on SBI personal loan is 12.75 per cent compared to 8-9.25 per cent for home loans, and the borrower has to hypothecate the items bought with the consumer durable loan to the bank. Other public sector banks, too, follow the same rules.

Private sector banks like HDFC and ICICI also offer home improvement/furnishing loans, which can be clubbed or taken as stand-alone loans.

“When included in the original home loan, the interest cost is the same as the housing loan, that is 8-9.25 per cent, and the repayment period is 15 or 20 years. No additional document is required except for the estimate of house improvement/furnishing cost.

“But taken on a stand-alone basis, it becomes a personal loan. At HDFC Bank, we offer a special discounted rate of 7.5 per cent (on personal loan) for existing customers,” says an HDFC Bank official.

“In this case, one can avail oneself of a loan up to a maximum of 10 times his or her monthly net salary. The repayment period is up to 48 months and a borrower is required to provide proof of the past three years’ continuous income, property documents to suggest it is unencumbered, age proof, address proof and identity proof.”

The bank lends up to 90 per cent of the total project cost, that is the cost of buying the flat, furnishing it, stamp duty and registration.

ICICI’s Rajiv Sabharwal says his bank offers home loan borrowers a maximum of 80 per cent of the aggregate of the cost of the house and improvement or furnishing expenses. “The loan can be repaid over a period of up to 15 years and the interest rates are the same as in home loans.”

The borrower, therefore, not only gains in terms of interest cost by clubbing the furnishing loan with the original home loan rather than taking it as a personal loan or consumer durable loan, but also by way of income tax deduction.

“A borrower can avail himself of income-tax deductions on the repayment of home furnishing/improvement loan, but the deduction is restricted to the interest component only, and not on the principal payment,” says the COO of ICICI Bank Home Finance.

The HDFC official explains the arithmetic.

“The law allows a maximum deduction of Rs 1,50,000 towards interest payment of a home loan. But in most cases, borrowers can’t reap the benefit simply because the interest component of their home loan is way below the permissible limit.

“Now, if they tag the home improvement/furnishing loan along with the basic home loan, then the interest component of home furnishing loan also gets tax deductible. This way, one can reduce his/her income-tax outgo,” the HDFC Bank official explains.

But there is a flip side, too. Since it is one loan, the entire amount is taken into account while calculating stamp duty and registration fees. In other words, the clubbing increases the registration cost.

But the benefits of tax and lower interest rates outweigh this small rise in registration cost.

So go grab it.