Whether you want to increase your property value or simply enhance the aesthetics of your house, you need a home renovation.
However, loan renovations can be costly and you may not be able to do up your dream house should you lack funds. Now, the good news is that you have alternative options to help you.
To push through one of your life goals this year, you may be thinking of getting a personal loan or a renovation loan. But, which is the better option?
Should you take a renovation loan? Or is it better to take a personal loan in Singapore for your home improvement projects?
The Differences: Personal Loan Vs Renovation Loan
Before answering which is the better option to take for home renovation, let’s analyse the differences between a personal loan and a renovation loan in Singapore.
Here are some differences between a personal loan and a renovation loan.
|Maximum Loan Amount||If your annual income is at least S$20,000, you can borrow up to 6x your monthly income.||The maximum loan quantum is capped at S$30,000 or 6x your monthly income, whichever is lower.|
|Interest Rate||Interest rates vary between banks. For licensed moneylenders, the interest rates must not be higher than 4% per month. This is usually higher than a renovation loan.||A renovation loan can have an interest rate of around 3% to 4% p.a., which is lower than a personal loan.|
|Interest Calculation||The interest is calculated based on the original loan amount.||The interest is calculated based on the outstanding balance of the loan.|
|Interest Over Time||The monthly interest remains the same throughout your loan tenure.||The monthly interest reduces as you repay the outstanding balance of the loan.|
|Minimum Income Requirement||There is no minimum income requirement for the licensed moneylender.
However, banks have varying minimum income requirements. They may require a minimum annual income of at least S$20,000 or S$30,000.
|The main applicant and the joint applicant need to have a minimum annual income requirement of S$24,000 and S$12,000, respectively.|
|Loan Purpose||You can spend a personal loan on anything you want. It is that flexible.
There are no restrictions on where you can spend the money.
|A renovation loan can only be used for approved renovation-related works such as tilework, paintwork, and electrical wiring. Take note that the money will be disbursed directly to your interior designer or contractor.|
|Eligibility Requirement||You must be a Singaporean Citizen, a PR, or a Foreigner between 21 to 65 years old.
If applying from banks, you must meet the minimum annual requirement, while there is no minimum annual income requirement for the licensed moneylender.
|You must be a Singaporean citizen or a PR between 21 to 65 years old and a homeowner or a family member.
Moreover, you must adhere to the minimum annual income requirement.
|Loan Approval Speed||It only takes minutes to get approved by a licensed moneylender.
In fact, at Crawfort, it only takes 8 minutes to get your loan approved.
The approval speed for banks may vary. It can take up to a few business days.
Learn more: How long does it take to get a personal loan in Singapore?
|Getting your renovation loan approved may vary depending on banks’ requirements and the borrower’s circumstances.|
|Offered By||Both banks and licensed moneylenders offer personal loans.||Only selected banks offer home renovation loans in Singapore.|
|Loan Tenure||It has a longer tenure than a renovation loan. It may take up to 7 years to repay a personal loan in Singapore.
However, remember that the longer the tenure, the more interest you will pay.
|The repayment period may take from 1 to 5 years.|
|Amount Of Paperwork Involved||You need to submit your proof of income.||You need to present a quotation or a renovation contract from your contractor together with your proof of income.|
So, Should You Take A Personal Loan Or A Renovation Loan For Home Renovation?
Ideally, the first option you may consider with home improvements is a renovation loan since it provides much lower interest rates. Moreover, interest calculation depends on the outstanding balance of the loan.
However, if you need funds higher than the loan quantum of S$30,000 or 6x your monthly income, you should consider a personal loan.
Furthermore, this is a better option to take if you want a fast and easy loan application process. It only takes minutes to get your loan approved by licensed moneylenders in Singapore, and there is considerably less paperwork involved.
Apart from this, there is no need to provide collateral when taking a personal loan from a licensed moneylender.
Moreover, there are circumstances when a personal loan comes in handy for home renovation projects.
1. Your contractor goes beyond the projected home renovation budget.
The bank requires a renovation contract or a quotation during the loan application. Moreover, the cap for a renovation loan is at S$30,000 or 6x your monthly income, whichever is lower.
So, when your contractor goes beyond the projected budget, a personal loan can be helpful.
2. You plan to change or add home appliances.
Getting new appliances to upgrade your home requires additional money. A personal loan is best for buying new appliances to complete your home upgrade.
The Bottom Line
There are circumstances when it is best to get a personal loan for home renovation projects. It comes in handy when you need additional funds to cover the entire costs of home improvements.
Moreover, qualifying for a personal loan is easy. There is no minimum income requirement when applying for a personal loan from a licensed moneylender. In addition, since this is an unsecured loan, there is no need for collateral.
Furthermore, if you need quick cash, a personal loan comes in handy. It only takes minutes to apply and get your loan approved. Additionally, you may collect the money from a licensed lender within the day of your application.
So, are you upgrading your home this year and in need of a personal loan? Crawfort can help and you can apply in minutes.