How Does A Renovation Loan Work In Singapore?


The electrical system in your home is too old and such an inconvenience. Look at the wall; the painting is too dull and torn out; wait, are those weeds in the garden?

If you’re in such a case, you might think you need a new home. But that’s not it; what you need is a facelift, a renovation to restore your home to its former glory with new and modern fittings.

However, renovation can be costly, especially when you haven’t set aside a budget for it. But don’t worry; you have options, such as taking out renovation loans in Singapore.

Such loans allow you to do the needed makeover and improve the condition of your home.  In this post, we will help you make sense of how does renovation loan work, what you need to know about renovation loans, and how to apply for one.

What Is A Renovation Loan?

A renovation loan is designed to allow homeowners like you to make necessary adjustments in their homes.

It is usually a short-term loan spanning between one to five years. Unlike typical personal loans, reno loans have low interest rates.

In addition, renovation loans are unsecured, so there’s no need to put up collateral for the loan. This also means you can borrow up to six times your annual salary.

To acquire such a loan, you will need to have a contractor who will be in charge of the renovations. This is because your lender disburses the funds to the contractor.

Such requirements ensure the loan is used for renovation costs and not for any other reason.

What You Need To Know About Renovation Loans In Singapore

Here are some of the things you should know about renovation loans.

What Can You Do With A Renovation Loan?

The extent of renovation loan use in Singapore will vary across lenders, whether a bank or licensed moneylender. Nevertheless, when you borrow this loan from a licensed moneylender such as Katong Credit, the extent of use can be classified into four groups:

     1. Extensive Repairs

These are inclusive of the following:

  • Floor re-installation
  • Repainting
  • Roof repairs
  • Change in decor
  • Electrical wiring
  • Plumbing etc

     2. Home Additions

These include but are not limited to the following:

  • Deck or patio additions

     3. Room Re-modelling

Such as:

  • Bathroom Fittings
  • Built-in cabinets in the kitchen

     4. Interior/Exterior Decor Changes

With this in mind, it is best to compare different lenders and what they offer, then choose the best option for you.

But if you require financial assistance from a trusted and licensed moneylender in Singapore, consider Katong Credit. At Katong Credit, we offer different loans, such as fast cash, bad credit, personal, wedding, and car loans. Reach out to us and let us know what you need.

Interest Rates On Reno Loans

Now that you have an idea of how does renovation loan work, you can proceed to consider the interest rates.

As said, renovation loan interest rates are much lower than personal loans. However, it is wise to do your calculations to consider how much you will pay at the end of the loan tenure. This is because you must pay the principal plus the interest.

In Singapore, renovation loans are usually charged the monthly rest interest rates. This means interest is charged based on the outstanding loan amount of the previous month.

As your loan balance reduces, so will the interest rate charged.

As such, do your math and compare different lenders for the best deal on rates and fees. You might be lucky to find a lender offering extra low rates and waivers on certain fees.

Loan Tenure

The loan tenure influences your instalments, loan amount, and interest rates.

It is advisable to consider your financial situation when choosing the appropriate loan tenure. In addition, consider how short and long loan tenures would affect you financially.

With short loan tenure, you’ll be done with repayments in no time. However, your monthly instalments will be high, which can strain your monthly budget.

With long loan tenure, the monthly instalments will be low, but the total you will repay in the end will be high.

Loan Amount

Since renovation loans are unsecured, you can borrow up to six times your annual salary or $30,000 (whichever is lower). However, to qualify for this amount, you must earn a minimum of $24,000.

However, while a loan worth six times your salary is tempting, it is best to get a contractor to estimate how much the entire renovation will cost. You can also use a renovation loan calculator to estimate your needed amount.

With will help you avoid over-browning, which can lead to a debt crisis. Only borrow what is needed.

Your Ability To Repay

Let’s face it, borrowing is easy but repaying is hard.

You need to assess your financial situation to determine your ability to cater for loan repayments in your monthly budget. You also must factor in unforeseen economic changes and obligations that could affect your repayment.

Do you have any outstanding loans, such as mortgages and personal loans? How will a new loan affect your ability to repay these loans consistently?

How To Apply For A Renovation Loan In Singapore

Once you have considered all the above, it’s time to apply for the loan. Here are the steps to follow:

Check Your Eligibility

There are specific requirements that you must meet to qualify for a renovation loan in Singapore. You must:

  • Be a property owner with proof of ownership
  • Be a Singaporean or permanent resident
  • Have a minimum annual salary of $24,000
  •  Be between the ages of 21 to 55
  • Have a good credit score
  • Have an employed joint applicant who is also a family member

Your credit score is used to gauge your creditworthiness. If your rating is high, you are a low risk borrower, and your application may be approved and even attract low interest rates.

However, a low rating may negatively affect how does renovation loan work for you. Your application may be nullified, or if approved, you’ll be charged a high interest rate as you are a risky borrower.

As such, go through your credit card rating and try to improve it before borrowing your renovation loan.

Get A Quotation

Once you verify that you meet the eligibility criteria, you can proceed to get a quotation for the renovation.

Contact different contractors to source the best deal and request a quotation.

Find A Lender

Now it’s time to source the best renovation loan deal. There are various licensed moneylenders in Singapore you can choose from. Do your due diligence by comparing different deals and discounts.

If you already have a home loan, consider taking a renovation loan from the same lender. This will save you tons of time and money in the end.

It would help if you also considered the associated costs, such as:

  • Loan processing fee
  • Late payment penalty
  • Early repayment penalty
  • Loan cancellation fee

Banks may offer waivers on some of the fees, so make sure you check out different promotions and discounts.

Remember to check out the application requirement of the specific lender you choose.

Prepare Your Documents

Some of the documents you may be required to submit include the following:

  • Proof of ownership
  • Last three months’ proof of income
  • Your NRIC
  • An original and signed contractor’s quotation
  • Most recent IRAS Assessment Notice
  • Proof of relationship between you and your joint applicant
  • Last 12 month’s statements for CPF contribution

Apply For The Loan

Once you have fully satisfied the above steps, go ahead and apply for the loan.

Luckily, due to digitalisation, you can easily fill out your application online via the lender’s website or

  • Log in to your Singpass account
  • Enter your name
  • Contact number
  • Loan Type
  • Loan amount
  • Monthly income

Submit the application and follow any additional steps.

Once your loan is processed and approved, you will receive an approval letter. You must go to the lender’s office for a face-to-face verification.

Once this is done, the funds will be disbursed to your contractor’s bank account.

Finally, on how does renovation loan work, if the current renovation loan terms don’t fit your situation, consider other alternatives such as personal loans. This may be beneficial when standard renovation loan packages do not cover your renovation plans.

A Renovation Loan Is What You Need

There’s no need to live in a dilapidated home. You need a home that represents you and who you are in painting or decor. And since buying a new home isn’t the only option, you can do more with what you already have by getting a renovation loan in Singapore.

Renovation loans allow you to upgrade your home with interior and exterior decor, home additions, extensive repairs, and room re-modelling.

But before applying for one, you need to understand how does renovation loan work. Look into the interest rates, the extent of use, loan amount, the loan tenure, and the eligibility criterion, and compare different lenders and offers.

If you require a personal or business loan, then apply for a loan with Katong Credit, your licensed moneylender in Singapore.