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.
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:
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:
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.
Again, personal loans seem to take the cake in this category too because:
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.
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:
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.
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:
Banks impose stricter eligibility conditions than licensed moneylenders in Singapore. For example, some banks only grant personal loans to:
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!