How Do You Apply For A Renovation Loan In Singapore?

There is one special thing that shows the difference between a responsible homeowner from the rest who are not – an instinctive love for the abode.

When you are used to your home, there is no doubt that you will develop a unique connection with it.

You will want it to reflect what you feel. This is why you need to keep your home well maintained.

If you are doing minor repairs, you can use your savings, but if they are major but you do not have enough cash, you can opt for a home renovation loan in Singapore.

A renovation loan in Singapore allows you to modify several areas in your home and increase its resale value.

You cannot use a renovation loan for other purposes such as buying furniture or paying a mortgage. This article will show you how to apply for a renovation loan in Singapore.

What Is A Renovation Loan?

Before applying for a home renovation loan, it is essential to start by understanding what a home renovation loan is.

It is a form of unsecured credit that allows homeowners to find the funds they need to spruce up their homes.

When you apply for a renovation loan and it’s approved, you can only use it to renovate your property.

In other words, you need an evaluation to identify the required amount that is necessary before you proceed to find out how to apply for a renovation loan.

For instance, if your home has an issue with its ceiling, a contractor will assess the level of damage and provide a comprehensive quote.

Because it is an unsecured loan, banks depend on your credit score to determine if they can offer you the renovation loan.

If you have a low credit score, they might approve your home renovation loan but with a higher interest rate than if you had had a higher credit score.

Therefore, it would help if you ensure your credit score is good so you can get the loan at a better rate.

What To Consider Before Getting A Home Renovation Loan

Work on your calculations and set your budget to know the exact costs of your renovations.

You should take an amount that you can repay comfortably so you don’t strain yourself financially.

Before taking the loan, think about whether to apply for a renovation loan from a bank or money lender.

A bank renovation loan is when a bank offers you money to renovate and increase your home’s value.

You are allowed to keep the loan proceeds after completion of the renovation and repay the bank with interest.

Because it is only meant for renovation purposes, a bank renovation loan has a shorter term compared to a personal loan.

If you intend to borrow from the bank for your renovation, opt for a renovation loan other than a personal loan.

How To Choose A Renovation Loan

Now that you understand its importance and you are ready to apply for one, it is essential to consider the following before you apply:

Interest Rates

When you apply for a home renovation loan, it is important to consider the interest rate.

You should aim to get the loan with the lowest interest rates.

Licensed money lenders charge interest rates as stipulated by rules set by the Ministry of Law.

Interest rates from money lenders are slightly higher than standard loans because it involves high risk. Try working with a licensed money lender that charges lower interest rates so that you can repay the loan more easily.

Processing Fees

Apart from the interest rates, it is crucial to check the processing fees. Some lenders charge up to 1.5% in processing fees, which can be high based on the amount you apply for your renovation loan. If possible, choose a lender that does not have a processing fee.

How Much The Lender Is Willing To Offer

Some tasks during renovation may be expensive. Therefore, you should check what different lenders can offer.

You are allowed in Singapore to take a borrowing loan of up to six months of your monthly income.

On top of that, most lenders will require you to have at least $24,000 to qualify for this loan.

Note that even considering the maximum amount lenders are willing to offer, it is vital to check what you can afford to repay.

Also, consider other debts you are committed to, such as personal or credit card loans, and ensure they do not take up too much of your salary.

Personal Credit Score

As mentioned above, a home renovation loan is a type of unsecured loan. Therefore, lenders will check your credit score to determine your interest.

If you have a poor score, you will attract a higher interest. Therefore, check your credit score before you apply for a renovation loan to ensure it’s good.

Extra Charges

If you take a close look at the agreement, you are likely to discover extra charges that may be applied in certain conditions.

The charges may include a penalty for late payment, overdue interest, cancellation, and early repayment.

Ensure you understand them since they might affect the total amount payable by the end of the term.

Loan Provider

It is important to consider the financial institution’s reputation, especially when dealing with money lenders.

Look for a licensed money lender that is lenient and reliable, and can offer help when you experience problems with monthly payments.

How To Reduce Renovation Costs

Renovation loans are usually expensive because of the demanding nature of renovation projects.

Although you aspire to have a dream home, you should only spend within your means to avoid costly measures.

Check with multiple contractors and designers to find one with better quotes before settling for any.

Instead of borrowing a lot of money to live in your dream home, consider your priorities.

How To Apply For A Renovation Loan

The procedure of applying for a renovation loan depends on the lender. The requirements that make one eligible for approval vary depending on the lender.

Some banks require borrowers with high credit scores, while others can offer a renovation loan to those with a lower score.

The first step to take during the application is to check your eligibility requirements. To qualify for a loan:

• Show proof of ownership. Banks will require proof of ownership because you can’t get a loan for a property you are renting. However, you can obtain the loan if you are related to the proprietor.
• You should also be a Singapore citizen or a permanent resident. You can’t obtain a loan if you are a foreigner in Singapore.

Most banks require the borrower to be between 21 to 65 years of age.

Certain banks have stringent rules concerning minimum yearly earnings and credit reports.

Therefore, they will only approve renovations if you earn at least $20,000 per year with a good credit score.

However, other banks will approve your loan if you earn at least $30,000 a year.

If you are wondering how to apply for a renovation loan, follow these tips:

Find A Good Lender

This is one of the most crucial steps while applying for a loan in Singapore. You can choose a bank or a licensed money lender.

Be very careful to avoid falling into the hands of loan scammers.

Check Terms And Conditions

It is important to check the terms and conditions of any lender. They are essential because they determine how you will efficiently service the credit.

Therefore, review the terms a licensed money lender offers carefully and select the appropriate one.

Good lenders tend to have lower rates and give transparent customer services. Also, they assure loyalty and fast loan processing by not having hidden charges.

A licensed money lender will check your current earnings and guide you with its offers accordingly.

Such a lender has a support team that makes the paperwork easy by perusing your application quickly so you get your renovation loan without any hassle.

Follow Their Recommended Method Of Application

Home renovation loan applications require one to submit several documents to the banks or licensed money lenders.

Such documents are vital as lenders will use them to determine whether you will receive the loan or not.

Mostly, this involves filling out a loan application and attaching documents such as bank statements for the last six to 12 months. They will also require a quotation from a licensed contractor.

After submitting the documents, wait for the loan to be approved.

Remember, you might not get approval if you don’t meet the requirements. For instance, banks may decline to approve if you have a poor credit score or are convinced you cannot repay.

Renovation Loan Interest Rates

When it comes to home renovation loans, lenders set higher interests because of the risks involved.

As mentioned above, one factor that influences loan approval is the credit score. So if you have a poor score, it increases the risk; hence the more interest you will pay.

For lenders, such loans are risky because the amount is based on the property’s future value.

Most home renovation interest rates are capped below 4.5% per annum. But you may find more competitive deals as low as 3% per year.

While several lenders offer distinct home renovation packages, you should choose them carefully.

Some lenders have lower rates and monthly interest, while others have lower processing fees.

A renovation loan calculator will come in handy when you do your calculations to get the best offer.

Difference Between A Renovation Loan And Personal Loan

As its name suggests, a renovation loan is used specifically for modifying a home.

When you get a renovation loan, you are limited in what you can do with the amount, unlike when you get personal loans.

When you get a personal loan, you have freedom of choice as you can use the amount on anything you want.

In addition, you can apply and get approved almost instantly, even when you request at short notice.

But renovation loans can take a while to get approved.

Criteria And Maximum Loan Amounts

“How much renovation loan can I get?” is a question many homeowners often ask.

Certain criteria need to be followed when it comes to the maximum loan amounts you can apply.

Most renovation loans require you to borrow up to six times your monthly salary and up to $30,000.

If you need more than $30,000, you can talk to your money lender to find the best deals. But you can also submit two different forms to two banks.

However, before you obtain additional loans, confirm how much your debt commitments will be each month.

The Total Debt Servicing Ratio (TDSR) restricts the amount of monthly debts you can have depending on your total monthly salary.

The current TDSR is set at 60%, which means you cannot exceed 60% of your monthly salary in your debt obligations.

Such obligations involve not only renovation loans but also car, home, and secured and unsecured loans.

What You Can Use A Renovation Loan For

Home renovation loans are specifically meant for:

• Roof repair
• Electrical system repair
• Floor repair
• Plumbing system repair
• Repainting walls
• Air conditioning system repair
• When preparing to sell your house

Generally, finding the right loan provider is a crucial step towards achieving the property you desire.

You can visit a licensed money lender to get transparent service that won’t bring problems.

Licensed lenders are required by law to follow regulations from the Ministry of Law in Singapore that prevent them from mistreating borrowers.

When you seek their services, you will get several factors in your favour, as they may be more lenient than banks in terms of their criteria.

Above all else, avoid falling into the hands of loan sharks.

To find out how to apply for a renovation loan, visit Katong Credit for easy loan applications and flexible terms. We will help you get the money you need with less effort.

Don’t have enough money to renovate your home?

Reach out to Katong Credit for an in-depth guide on which renovation loan best suits you. Or apply for a loan now.