A home renovation loan offers homeowners money to fix their homes. It refers to an unsecured loan where you will not need to provide collateral. When unable to repay your home renovation loan, your collateral is not at risk.
Renovation loans are different from home refinance and home equity loans. The latter ones are mortgage-oriented loans that have a longer period of repayment and involve large amounts. Moreover, they are difficult to obtain when you compare them to home renovation loans.
Before approving a renovation loan, the lenders ask you to be specific about your home maintenance project. The loan amount for home renovation varies from one lender to the other. For more information, we have listed below a few points that will enable you to understand how does renovation loan works Singapore.
What Are The Requirements For A Home Renovation Loan In Singapore?
- Be the property’s owner
You can borrow from banks, only if you are the owner of the property. In case you want to renovate your bungalow or apartment, carry your proof of ownership.
However, borrowing from licensed money lender does not require that you are a homeowner. You can easily borrow a personal loan for home renovation.
- A resident of Singapore
If you live in Singapore and are between the ages of twenty-one and sixty-one, you can get your renovation loan in no time. You have to only carry proof that you are a permanent resident in Singapore.
- Minimum annual income
Your minimum annual income in Singapore has to be S$19,200. Some lenders may require a higher income that can go up to S$30,000.
- Good credit score
Lenders in Singapore depend on credit to determine whether the borrower has good creditworthiness. In case you have a low credit score, your renovation loan will come with a higher rate of interest as you will be deemed as high-risk. If you want a home loan, then work on building your credit score before you apply for a renovation loan.
Things You Need To Consider When You Apply For A Renovation Loan In Singapore
Your ability to repay the renovation loan
You need to think first about what you can and cannot afford. The best license money lender in Singapore will help you get more money for your renovation loan, but you need to think about your ability to repay the loan. Make sure to have a look at your monthly budgets to determine whether taking the renovation loan will put a financial strain on you or not.
The time period for the repayment of the loan
You will get a substantial amount to renovate your home, but you need to take into consideration the time period for the repayment of the loan. Payment can be broken into monthly instalments. A longer-term will cut down monthly payments but increase the amount that you need to pay.
Rate of Interest
The interest is the amount that you pay with the principal amount. You can pick a low rate of interest as it will help decrease the overall cost of payment. For this purpose, you can compare the different rates of interest that different money lenders are offering and pick which one is the most affordable.
Using Renovation Loan to improve credit score
You can use your renovation loan to improve your credit score. You can do this by simply paying all the monthly instalments on time. Moreover, when you secure a renovation loan, it enriches your credit mix by enhancing your credit score.
Tips For Choosing Renovation Loans In Singapore
- Keep the tenure short
Renovation Loans cannot be refinanced like home loans. If you select a loan of five years, you will remain with the same bank for a period of five years. In addition, the value of a renovation, unlike property, will not be appreciated. It will only be for consumption, so you will not want to be in debt for a long time.
- Crunch some numbers
Try quantifying the benefits that you will get from a renovation loan. You have to find out ways by which your home renovation can increase your yield, especially if you are the property’s owner. This will help you cover the costs of repayment for your renovation loan.
Renovation loans help you upgrade your house. But, ensure that the time of repayment is shorter with a low-interest rate. This way, you can save your money and time.