How To Apply For A Renovation Loan In Singapore
A renovation loan can be used for everything from adding a new room or bathroom to remodelling your kitchen. It allows you to borrow money from your bank or other lender and then spend it on your project.
Renovation loans often have flexible repayment periods and low interest rates. But it’s important to consider everything before applying for a renovation loan.
If you’re looking for more information about renovation loans, this guide will cover what you need to know about how to apply renovation loan and what to expect during the process.
What Is A Renovation Loan?
A renovation loan is used to finance the cost of renovating your home. The money can be used for various things, such as constructing new windows, electrical wiring, or to remodel your kitchen.
The loan can also be used for a wide variety of purposes such as painting, tiling, flooring, or rebuilding damaged parts of your home.
In simple terms, a home renovation loan is an unsecured loan that does not require you to use your home as collateral.
Once you know how to apply renovation loan, you can get one from banks or licensed money lenders.
What To Consider Before Getting A Renovation Loan
While there are many reasons you might want to get a renovation loan, you should understand the risks and responsibilities that come with borrowing money for renovations.
Here are some points to keep in mind when you’re shopping around for a renovation loan:
Interest rates: The renovation loan’s interest rate is a key consideration. The higher the interest rate, the more expensive the loan will be for you in the long run. It is because most renovation loans are repaid through monthly installments, so if you borrow at a higher rate, you’ll have to repay more each month.
Processing fees: The cost of a renovation loan varies from lender to lender, so it pays to shop around for the best deal. Some lenders charge processing or application fees, while others charge exit fees or prepayment penalties if you repay your renovation loan early. Find out how much each lender charges in upfront costs and ongoing fees first.
Loan provider: There are different types of lenders in Singapore that offer home renovation loans. Banks have more stringent criteria, while licensed money lenders are more lenient and may offer flexible repayments.
Loan quantum: Based on the work that you want done on your home, get quotes from a few contractors and vendors. This will give you a better idea of the loan amount that you need. You can also use a renovation loan calculator to help you determine the amount of money you need to borrow.
How To Choose A Renovation Loan
Here are some tips for choosing the right renovation loan.
Know how much you are eligible for: Renovation loans are smaller in amount. You can borrow up to $30,000 or six times your monthly income, whichever is lower. The maximum loan amount depends on the lender and your finances. Some banks offer loan limits as low as $5,000.
Look at the interest rate: This is crucial if you don’t want to pay more than you need to. In general, most renovation loans have interest rates below 5%, while personal loans have interest rates between 3.5-11%.
Choose the right loan tenure: This refers to the period of time you have to repay the loan. It ranges from one to five years for most banks and money lenders. A longer tenure means you pay lower monthly installments, but the amount of interest you pay will be more overall.
Decide on your budget: If you’re just getting started with the renovation works, get an idea of how much you’ll need using your contractor’s quote as a gauge. Ensure that this is an amount you can pay back every month.
Shop around to find the best loan offer: Don’t just pick the first lender that comes along – check what banks and licensed money lenders are offering. Pick a renovation loan with the lowest interest rate and processing fee. This is a one-time fee charged by the bank or money lender for processing your loan application. It usually ranges between 1-1.5% for renovation loans.
Check for hidden fees and penalties: Some lenders have early repayment charges if you repay your renovation loan early. Some may have various restrictions on how you can use the loan, while others may have hidden charges, terms, or conditions. Always read the fine print carefully.
How To Apply Renovation Loan
You need to know how to apply renovation loan before you can get approved for your loan.
The first step is to get a quote from your contractor. You should know how much the renovation will cost and how long it will take. Also, you should speak with a few contractors before settling on one.
Next, you need to prepare your documents, such as the following:
- Latest IRAS Notice of Assessment
- Income statements
- Invoice or quotation from contractor to verify loan amount
- Proof of home ownership
Finally, apply for a renovation loan with a legal money lender or bank. For the former, the application process takes only a few minutes, and you are likely to hear back from the money lender within one business day.
Banks will take longer. Note that banks do not disburse the money to you, but directly to relevant vendors or contractors. You can receive the money directly from licensed money lenders.
Differences Between Renovation Loans and Personal Loans
A renovation loan and a personal loan have different purposes. Before you decide which loan to apply for, it is important to understand their differences to choose the best option for your situation.
Renovation loan: It funds repairs and improvements that add value to your property. These loans are often used for kitchen renovations, bathroom upgrades, and other home improvement works.
Personal loan: While personal loans can be used for just about anything, such as to finance car repairs, home renovations, and debt consolidation, their interest rates are higher than that of renovation loans.
Unlike personal loans, money lenders or banks will verify how you spend a renovation loan. But renovation loans may be easier to qualify for because of their lower loan limit.
Criteria and Maximum Loan Amounts
Perhaps you’re wondering how much renovation loan can I get. As mentioned, you can borrow up to $30,000 or six times your monthly income, whichever is lower.
Home renovation loans are available from banks and licensed money lenders.
To apply for one, you need to:
- Be a Singaporean or permanent resident
- Be 21 to 65 years of age
- Earn at least $24,000 in annual income
- Have a decent credit score
- Be the homeowner or homeowner’s immediate family member (i.e. parent, sibling, spouse, or child)
What Can You Use A Renovation Loan For?
A renovation loan is a great way to pay for home improvements. Now that you know how to apply renovation loan, here are the types of renovations that you can use the loan for:
- Bathroom fittings installation and repair
- Built-in cabinets
- Ceiling, flooring, or wall repairs
- Electrical and wiring reworks
- Painting or redecorating works (e.g. wallpaper)
- Solar panels installation
- Structural alterations
Find The Right Renovation Loan And Lender
Even though you now know how to apply renovation loan, you don’t need to make a hasty decision.
When it comes to deciding on whether or not to apply for a renovation loan, weigh all your options first and consider your repayment capability.
While taking out a loan may seem like a good way to get the home improvements you want, there are other factors that you need to take into consideration, such as whether you can afford the monthly installments.
If you have made up your mind, contact Horison Credit to get a renovation loan.
We are a trusted licensed money lender in Singapore that offers some of the most reasonable interest rates and fees. We would be more than happy to help you in any way we can.