Part of the beauty of owning your own home comes from having the ability to transform it into the home of your dreams.

Think beautiful built-in kitchen cabinets, a kitchen skylight, an outdoor patio, or even a nursery to welcome a new baby.

Your home should be your haven after a long day’s work; don’t forget about the compliments from visitors.

But what if you just forked out a massive amount for your home downpayment, and now you’re short on funds? How do you transform your home just the way you want it?

Renovation loans in Singapore can come to your rescue.

For between $15,000 to $100,000, you can get the right amount you need to bring your dream home to reality.

Find out how to apply renovation loan in this article.

What Is A Renovation Loan?

A renovation loan is used to finance improvements to both new and existing homes.

It is obtained solely for this purpose, and the funds are not meant to be diverted to other uses.

What You Can Use A Renovation Loan For?

Renovation loans are used for home improvements that are of a permanent nature.

So if you’re considering a renovation loan, keep in mind that the loan can be used for the following:

  • Structural alterations (e.g adding new walls to create more space or rooms)
  • Flooring and tiling
  • Built-in cabinets
  • Basic bathroom fittings
  • Wiring and electrical works
  • Painting and decorating
  • Renovations outside the home (e.g. driveway construction)

Home renovation loans cannot be used for:

  • Air-conditioning
  • Washing machine
  • Refrigerator
  • Curtains
  • Household appliances
  • Furnishings
  • Other improvements that are not of a permanent nature

However, some loan providers such as licensed money lenders like U Credit, can grant furnishing loans with higher interest rates.

You can also take out a personal loan for non-permanent renovations.

What To Consider Before Getting A Renovation Loan 

A renovation loan or reno loan is a debt that you’ll have to service monthly, so it’s crucial you consider the following before getting a Singapore renovation loan:

  • Your budget and ability to repay the loan
  • Renovation loan interest rate
  • Credit score or credit history
  • Other funding options

Your Budget And Ability To Repay The Loan

The first thing you want to consider is how much your renovation would cost. That way you can fit the repayment into your general budget.

It’s not uncommon to find most Singaporeans with a number of debts such as personal loans, student loans or car loans.

It’s wise to gauge how your renovation loan fits into all of them, and determine your ability to pay upfront.

When considering your ability to repay the loan, keep in mind:

  • Other debts you’re servicing
  • Living expenses such as rent and food
  • Utilities for power, gas and others
  • Monthly savings if any

As a rule of thumb, try to keep your debts under or equal to 30% of your monthly income.

Renovation Loan Interest Rate

The interest rate for renovation loans can range anywhere from 3-4%. You’ll be paying both the interest every month and a part of the principal.

Before getting a loan, look over the interest rate of different sources you can borrow from to help you get the best deal.

Credit Score Or Credit History

Renovations loans are usually unsecured loans.

Some loan providers such as banks will look at your credit score or history before they grant you a loan.

If you have a bad credit score or history, it might be hard to get a renovation loan from banks.

Licensed money lenders on the other hand do not consider your credit score, however, they will consider your ability to repay the loan.

Other Funding Options

While a renovation loan promises an “easy way out” to fix your home, understand that in the following month, you’ll have to start repaying your debt.

Combine this with other debts you may have, and it might become overwhelming.

So before you get a renovation loan, consider if you can get the funds to renovate your home elsewhere – maybe borrowing from a close friend, or using your savings.

Ensure you have considered all possible options before settling for a renovation loan.

How To Choose A Renovation Loan 

To choose the best renovation loan at a particular point in time, you have to take into consideration several factors. These include:

Loan Provider

The two external funding sources for home renovations are banks and legal money lenders.

Each source will have its own perks, so consider if those perks will be more appealing to you.

For instance, when borrowing from money lenders, you can avoid the hassle and fuss it takes to borrow from a bank as money lenders are often much quicker in disbursing loans.

The Maximum Loan Amount Available To You

It’s important to be aware of the maximum loan amount you can borrow from both types of lenders.

Since renovation loans are unsecured loans, you can borrow up to six times your monthly income, which is capped at $30,000.

In addition, banks may have minimum loan amounts. Some may require the least amount you can borrow to start from $10,000.

Interest Rate And Other Fees

Aside from renovation loans having interest fees ranging from 3-4%, obtaining a renovation loan may also incur other fees.

It’s important to consider the fees from different lending sources to enable you to get the most favourable loan.

Other fees can include:

  • Processing fees, typically 1% is pegged to the loan amount
  • A cancellation fee of 1% if you want to cancel the contract
  • An admin fee if you want the loan to be granted in multiple cashier orders
  • Late payment fees if you default on paying as at when due
  • Insurance fees – typically 1% (for some loan providers)

A loan provider may also be running a promotional interest rate for renovation loans. This can mean you pay lower interest for a period of time.

Also, note that interest rates can be calculated based on monthly rest or a flat rate.

When calculated on monthly rest, interest is charged on the outstanding loan amount. For flat rate, interest for each month is calculated on the principal amount.

Criteria And Maximum Loan Amounts

As mentioned earlier, the maximum loan amount you can be granted for a home renovation loan is up to six times your monthly income or $30,000, whichever is lower.

To be eligible for a loan, you must:

  • Be a citizen of Singapore or a permanent resident
  • Be between the ages of 21 to 65
  • Have an annual income of at least $20,000
  • Have a fair credit score
  • Have a main applicant or joint applicant who is the owner of the property
  • Have a joint applicant who is the spouse, child or sibling of the main applicant and who is employed

How To Apply For A Renovation Loan 

To apply for a renovation loan in Singapore, you can choose to apply with banks or via a licensed money lender.

Banks have their own criteria for granting the loan, and so do money lenders.

Interest rates and other fees will also vary between banks and money lenders.

To apply for a renovation loan:

  • Get a quote from your contractor
  • Prepare the necessary documents
  • Apply for the loan

Get A Quote

The last thing you want to do is not get a quote before you apply for a loan. This can lead to borrowing more than you need or not borrowing enough.

Getting a quote from a vendor helps you determine how much your renovations will cost, so you can fill in the right amount when applying.

Also, it may be required during the application process.

It’s best to check out several vendors so you get a fair price. You can also use a renovation loan calculator to estimate how much the renovation will cost.

Prepare The Necessary Documents 

Ensure you have the right documents to ensure a smooth application process. The common documents that will be required are:

  • NRIC
  • Income documents
  • Proof of home ownership
  • Proof of employment for joint applicants
  • Latest IRAS Notice of Assessment
  • HDB or MCST renovation permit (where applicable)

Apply For The Loan

Once you have your documents ready, you can begin the loan application process. You can apply for a renovation loan online, or visit the business address of the loan provider.

How fast the loan is approved and disbursed depends on the channel you’re using. Money lenders usually have a much faster turnaround time compared to banks.

This means you can get started with turning your dream home into a reality as soon as possible.

Differences Between Renovation Loan And Personal Loan

Why apply for a renovation loan? Isn’t it the same as a personal loan?

Renovation loans are different from personal loans in the sense that renovation loans are strictly used for improving an old or new home.

Personal loans, on the other hand, have no strict requirements and can be used for different purposes.

While a renovation loan is capped at $30,000, personal loans of up to $250,000 can be granted depending on the borrower’s income and repayment ability.

Another thing to note is that servicing personal loans is more expensive than renovation loans.

While both loans usually have similar repayment tenures, the interest rate for personal loans can be up to 8%.

The table below summarises the differences between renovation loans and personal loans.

Renovation LoanPersonal Loan
Loan UseOnly for renovations of a permanent nature to new and existing homesCan be obtained and used for various purposes such as education, renovations, travel and more
Interest RateLower interest rate. Typically ranges from 3-4%Higher interest rate, usually from 3.5-11%
Other FeesLower processing fees and admin fees. Starting from 0-1.5%Higher processing and admin fees. Starting from 1-3% and more
Maximum Loan AmountUp to 6x the borrower’s monthly income, or $30,000, whichever is lowerBorrowers earning at least $120,000 annually can borrow up to 10x their monthly fee.
Loan TenureOne to five yearsFive years or more
Availability Of LoanNot all banks offer renovation loans. All money lenders can offer renovation loansOffered by both banks and money lenders

A Renovation Loan May Be Just What You Need

We know you can’t wait to transform your dream home into reality, and that’s why U Credit, a trusted licensed money lender in Singapore, has made the process easy for you.

Getting a renovation loan with us is as simple as 1,2,3.

  1. Apply for a loan here, or call us at +65 6337 1768.
  2. A loan officer will reach out to you to discuss the details of your loan and eligibility status.
  3. Once your loan is approved, start renovating your home to your personal preferences.

With U Credit renovation loans, it has never been easier and more affordable to customise your home just the way you want it.

Contact us today to get started.