Key Differences Between A Home Renovation Loan & A Personal Loan

CreditMaster January 27, 2022

Key Differences Between A Home Renovation Loan & A Personal Loan


You want the best for your home – it’s only logical. So, when you decide you want to renovate, you’ll need to find the solution for a dream remodelling within your budget.

Pro tip: Having a budget is crucial even (more) when you get a loan.

But half your problems are solved if you get the correct financial assistance.

Are you considering a renovation loan or a personal loan? What are the differences between them? Read our article to understand more.


What Can You Do With The Loan Money?

Renovation loans are solely intended for renovating your apartment or house. That means you can’t apply for a renovation loan and use the money for something else.

For example, you can’t even use $100 from that amount to treat yourself to a bottle of wine when your apartment’s renovations are through. Or a bottle of Tequila when your contractor suddenly announces something went wrong.

Things get worse:

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    Traditional renovation loans can’t be used to purchase new furniture or decorations, even if these items technically regard your home’s remodelling.

    Of course, some licensed moneylenders in Singapore offer some of these facilities within their loan, but other conditions may apply.

    By comparison, personal loans look like a breeze of freedom:

    • You can use them for whichever purpose you want.
    • The bank’s not going to check how you’re using that money, and even better:
    • The funds are wired directly into your bank account. By comparison, renovation loans are wired into your contractor’s account.


    How Much Can You Borrow?


    A renovation loan from the bank allows you to borrow up to six times your monthly income or up to $30,000 – or whichever is lower.

    That means if you’re earning $6,000/ month, you can’t obtain $36,000; you’re limited to that $30,000.

    However, certain financial institutions offer greater renovation loan amounts that are greater than $30,000! CreditMaster is one of them and you can apply here.

    Again, personal loans seem to take the cake in this category too because:

    • Most licensed moneylenders will grant you 4-6 times your monthly salary. So, if you’re earning over $5,000/month, you can obtain more than $30,000.
    • Some banks in Singapore can offer personal loans up to ten times your monthly salary if you come from a high-income class and have an excellent credit rating. In fact, we’re betting you can obtain even more if you’re Jeff Bezos-wealthy and have a good relationship with that bank. But for us regular folks, it means you can receive $60,000 if you have a $6,000 salary.

    Pro tip: Make sure you need that money before applying for a loan. It’s never a good idea to borrow more money than it’s actually required because you fall down a slippery slope of bad debt.


    Loan Interest Rates

    This is where good times end for personal loans; it’s the moment for the renovation loan to shine.

    Here’s why: Getting a renovation loan guarantees you decreased interest rates because the sum is lower and because the bank/licensed moneylender knows how you’re using the money.

    As such, a bank can offer you a renovation loan with:

    • EIR < 5%
    • AIR < 3%

    By comparison, banks’ personal loans are usually 1% higher. So, a $30k personal loan is $1,500 more expensive than a $30k renovation loan for a 5-year tenure.

    However, you can see a more massive difference between these interest rates for licensed moneylenders.

    As such, a personal loan can have a 4% interest rate/ month maximum, but most licensed moneylenders set lower 1-3% interest rates for renovation loans. That’s a 12-36% interest rate/year, compared to 48%/year.


    Loan Tenure

    Tenure-wise, your renovation loan should be 1-5 years. That means a renovation loan can’t last for longer than 60 months. Most personal loans are about five years too.

    The relatively significant difference, in this case, is that some personal loans can stretch for longer than that, depending on factors like:

    • Your principal amount
    • Your credit rating and income
    • Your relationship with the bank
    • Your interest


    Loan Eligibility


    Banks impose stricter eligibility conditions than licensed moneylenders in Singapore. For example, some banks only grant personal loans to:

    • People aged 21-65
    • Those who earn at least $20,000/year
    • Citizens or PRs

    By comparison, licensed moneylenders in Singapore don’t impose these conditions if you prove you can repay the loan.

    Pro tip: Whether you get a personal or renovation loan, licensed moneylenders like CreditMaster can get your request approved in minutes. We have helped hundreds of homeowners renovate their houses successfully!

    Apply here.


    At CreditMaster, we believe in building long-term relationships with our clients. Our team of experienced professionals is always ready to provide personalised financial advice and assistance to ensure that our clients make informed decisions. We understand that each client's situation is unique, and we strive to tailor our services to meet their specific needs.

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