Should You Take A Renovation Loan Or A Personal Loan?

Purpose-specific loans are often considered better than generic loans, for example, personal loans, because purpose-specific loans have reduced interest rates.

This can be true because banks usually provide reduced interest rates on home improvement and automobile loans since your home or car can be used as collateral that the bank can seize if you default on your payments. A personal loan, on the other hand, doesn’t require any form of collateral. This entails a larger risk for banks, which they attempt to minimize by charging a higher interest rate.

In addition, the interest rates for remodelling and personal loans are computed differently. Best renovation loan have a monthly rest rate, which means interest is calculated on the remaining balance of the loan. The interest on your ongoing loan decreases over time as you pay it off each month.

The interest on a personal loan, on the other hand, is calculated at a fixed rate. This means that interest payments are computed using the initial loan amount as a starting point. Even though your outstanding loan decreases over time, your monthly interest rate remains constant.

Banks do, however, occasionally provide personal loan like personal loan Singapore promotions, such as lower interest rates, waived processing fees, or even shop coupons. Promotions change frequently, and a personal loan could be just as appealing as a remodelling loan under the right circumstances.

Renovation Loan Vs. Personal Loan

Let’s look at the differences between personal loans and remodelling loans. When compared to personal loans, renovation loans have various drawbacks, including:

1. You have access to a lower amount of money. For example, if your monthly income is $6,000, you can only borrow up to $30,000.

2. Renovation loans have a shorter repayment period. Your agent, on the other hand, can set a personal loan for a period longer than five years.

3. The variation in instalments is nearly insignificant. Even if bank-issued personal loans have slightly higher interest rates, your monthly payments would be identical. A $20,000 personal loan for 5 years, for example, will cost $400-$430 a month.

4. Personal loans offer additional flexibility. A renovation loan can only be used for particular projects like tiling, flooring, carpentry, masonry, or wiring, not for furniture or accessories.

5. The funds may not be put into your account. If you choose a renovation loan, your builder will receive the funds.

So, Why Should You Take Out A Renovation Loan?

Apart from saving roughly $50 per month on instalments, another big benefit is that you have a better chance of getting that remodelling loan, even if your income and credit score are both low. Because the bank or your licensed moneylender will know precisely what you’re doing with the money, they consider this choice to be less dangerous.

What Can A Renovation Loan Be Used For?

After speaking with your interior designer, you’ll need to consider how you’ll pay for the project. Your renovation loan can only be used for the following projects:

  • Hacking: hacking, rebuilding, or plastering walls
  • Masonry: flooring, tiling, and wet works
  • Carpentry: individualized solutions for constructed wardrobes, cabinets, or storage features
  • Roof and Divider
  • Plumbing Works
  • Electrical Works
  • Painting
  • Cleaning & Polishing

You can’t use your renovation loan for the following things:

  • Home improvements
  • Adornments (curtains, carpets, covers, etc.)
  • Furniture Pro tip: If you desire these other things in the end, you can: – Negotiate your loan terms. In Singapore, a few licensed moneylenders offer remodelling loans with furniture purchases included.
  • Get a personal loan or a store loan for the things not covered by the remodelling loan.

As a result, below are some of the most typical repairs and restorations for which Singaporeans use their renovation loans:

  • Repairing a leaking roof
  • Repairing damaged or dented floors – Repainting walls – Adding a baby room, office, or patio to your home
  • Fixing a broken electrical system that might potentially create a fire – Repairing plumbing blockages or leaks that would otherwise flood your property
  • Renovations to your home, such as cabinets or wardrobes, make it more usable.

Discover more about personal and renovation loan at Crawfort Licensed Money Lender.