Are you thinking of taking a home renovation loan in Singapore this year? A renovation loan is perfect if you want to add more value to your home. Moreover, having your home renovated can increase comfort and function. So, you can say, there’s no place like home.

Furthermore, the pandemic has made us realise the value of having a comfortable home. Thus, having your home renovated is essential nowadays.

Based on a cost guide from Qanvast, renovation for a new BTO flat has an average of about S$44,000. Moreover, an HDB resale flat renovation has an average cost of about S$67,000.

This implies that requires a huge budget and savings may not be enough. We need additional funds to fulfill this goal.

However, in taking funds for your house renovation in Singapore, you might be wondering which is a better option is. Is it better to take a renovation loan or a personal loan in Singapore?

To answer that question, it is best if we can have a comparison between renovation loans and personal loans in Singapore.

What Is A Renovation Loan In Singapore?

Renovation Loan in Singapore

A renovation loan funds home improvement projects – a special purpose loan. You can use a home renovation loan to improve your kitchen or even give a complete makeover to your home.

Borrowers use it to pay for their desired renovations and repairs. They can use it to buy new fixtures, extensive repairs, or have a major house revamp.

Moreover, a borrower has the comfort to fulfill his house renovation project without worrying about cash flow.
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What About A Personal Loan In Singapore?

A personal loan is a type of unsecured loan applied from various financial institutions such as banks and licensed moneylenders in Singapore.

This is ideal if you need cash urgently. There are licensed moneylenders in Singapore that can approve a personal loan in minutes. Moreover, you can collect the cash within the day of the application.

Unlike a renovation loan, a personal loan is so flexible to use. You can use it in almost everything – whether it is for emergencies, monthly bills, weddings, and even home renovation.

To understand personal loans from renovation loans, let us identify their major differences. Renovation  loan vs personal loan- what’s the difference?
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What Is The Difference Between Renovation Loan And Personal Loan?

Renovation Loan Vs Personal Loan in Singapore

Questions to ConsiderPersonal LoanRenovation Loan
How much money can you borrow?Get up to 6x your monthly income if you earn an annual income of at least S$20,000.Have a maximum of S$30,000 or 6x your monthly income, whichever is lower.
How you can use the loan?Used for almost anything e.g. emergencies, monthly bills, weddings, and other financial needs.Only for approved-renovation projects such as repainting, electrical works, or major repairs.
What is the interest rate?Interest rates from various lenders are usually higher than renovation loans. Interest is the same all throughout the loan.Interest rates are around 3 to 4% p.a. which is lower than the personal loan, and reduces as you pay off the loan.
What is the eligibility criteria?Anyone can apply – a 21-65 year old Singaporean Citizen, a PR or PR Residing Singapore can borrow from a licensed moneylender in Singapore even if the income is less than S$10,000 while the minimum annual income requirement for banks may vary (typically requiring at least S$20,000).The borrower must be a homeowner or a family member and needs to meet the age and income requirement.
How long does it take for a loan to be disbursed?Disbursement from licensed lender can only take minutes after the approval. You have to collect the money from the licensed lender office.It may vary depending on banks and your requirements.
What is the duration of repayment?

Loan tenure from banks can take up to 7 years and up to 4 years for a Licensed Moneylender.Standard loan tenure may take from 1 to 5 years.
Where to apply?Apply for a personal loan from Banks and Licensed Lenders in Singapore.Take a renovation loan from selected banks.

1. Amount of the Loan

How much money can I borrow from a personal loan?

You can take up to 6 times your monthly income if you earn at least S$20,000 annually with a personal loan. For Singaporean citizens and PR, get a minimum loan of at least S$3,000 for annual income less than S$10,000 and about S$500 for Foreigners residing in Singapore.

How much renovation loan can I get?

However, a renovation loan has a lower loan ceiling. You can borrow up to 6 times your monthly income or S$30,000, whichever is lower. Moreover, the minimum loan amount is about S$10,000.

2. Loan Eligibility

Can anybody get a personal loan in Singapore?

A personal loan is taken by anyone in Singapore that meets the income and age requirements.

Banks typically require that you are a Singaporean Citizen, a PR, or a Foreigner residing in Singapore aged 21-65 years old. You must have an annual income of at least S$20,000.

Moreover, a licensed lender in Singapore has the same age requirement but has a much lower annual income requirement – less than S$10.000.

Who can take a renovation loan?

However, a renovation loan requires that you are the homeowner, or a related family member (with the owner’s consent). Moreover, here are the other eligibility criteria:

  • Singaporean or PR Citizen
  • 21-65 years old
  • Typically have an annual income requirement of at least S$20,000

3. Purpose of the Loan

What is the purpose of a personal loan? 

You can use the money from a personal loan at your own discretion. You can use the personal loan for any needs such as emergencies, monthly bills, weddings (big day), large purchases, paying debt, and even renovating a home.

How do home renovation loans work in Singapore?

A renovation loan is taken by a borrower to fund renovation-related works such as:

  • Remodeling a room
  • Extensive repairs
  • Revamping your interior design
  • Extending a part of a house

Once your renovation loan is approved, the money will be disbursed directly the to the renovation contractor in the form of cashier’s order.

4. Interest Rates

What is the interest rate for a personal loan in Singapore?

Typically banks can charge an interest rate for a personal loan around 3.5% to 10.8% per annum.

On the other hand, licensed moneylenders in Singapore can charge an interest rate of not more than 4% per month.

Moreover, the interest is calculated based on the original amount. Therefore, you will notice that the interest rates remain the same for the personal loan throughout the loan tenure.

What about the interest rate of a renovation loan?

Unlike the personal loan, the renovation loan in Singapore has a much lower interest rate. It is about 3 to 4% per annum.

The interest rate of a renovation loan depends on the outstanding balance, wherein the monthly interest rate reduces as you pay off the loan.

5. Speed of Disbursement

How long does it take for a personal loan to be disbursed?

For a personal loan, disbursement from a licensed lender can only take minutes after the approval. Then, you have to collect the money from the licensed moneylender’s office.

It may take the next day or a few business days after your loan approval from banks. The speed of disbursement will depend on the length of the approval process.

How about the home renovation loan?

The speed of the disbursement of renovation loans will depend on the approval process.

6. Duration of Repayment

What is the maximum tenure for a personal loan?

The personal loan in Singapore has the longest tenure compared to the renovation loan. It can last up to 7 years.

However, remember that the longest tenure can have a higher interest.

What is the maximum tenure for a renovation loan?

Unlike a personal loan, a renovation loan can have a maximum tenure of up to 5 years.

Personal Loan Vs Renovation Loan in Singapore: Which One Should You Get For Home Improvements?

Is taking a renovation loan a good idea or a personal loan for home improvements?

Ideally, there is a belief that it is better to take purpose-specific loans since it provides a much lower interest rate – especially if you find the best renovation loan in Singapore.

However, it is wiser to get a personal loan in Singapore because of its flexibility. Moreover, there are circumstances when a personal loan is ideal for a home renovation loan.
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When to Take Personal Loan for Home Renovation?

There are certain events when a personal loan can help you fund your dream home renovation project.

  • Your renovation costs exceeded the home renovation budget.
  • Need instant cash for emergency repair needs.
  • There is something wrong with the renovation project, and you need to change your contractor. It will require additional costs.
  • There are existing promotions for a personal loan wherein the interest rates are much lower than the renovation loan.
  • No need to provide collateral since this is a type of unsecured loan.

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In Summary

Although, a renovation loan can be a better option for a house improvement project. However, there are circumstances where a personal loan is a better option or a house improvement.

When using a personal loan for home renovation, it is essential to find the one with promotions. Look for a personal loan with better interest rates and reduced processing fees.

Moreover, make sure that you assess your repayment capability. Pay your loan on time to avoid paying a much higher interest rate and lower credit score.

Are you searching for the best personal loan offer in Singapore to fulfill your home improvement project?

Published On: September 20th, 2023

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