Personal loan

When to Use a Personal Loan for Home Renovations

By Alevin Chan | On November 17, 2017 | Reading time: 3 mins


Under special circumstances, personal loans can help fund your home renovations in Singapore.

The problem with renovating your flat in Singapore is that you never know how much it will cost. Sure, a contractor may tell you it’ll cost $20,000, but you might spend twice that amount by the time they’re done.

This is when you need to start looking for the right personal loan for your home renovation.

Should a Personal Loan Be the First Option For Renovating Your Flat?

For home renovations, a personal loan is not the first loan you should take. Instead, look for home renovation loans (reno loans) from the banks. Reno loans tend to have a lower interest rate than personal loans – about three per cent per annum, versus six per cent per annum. You may also get the occasional special deal: ask the banker you got your mortgage from, and she may even be able to get you an interest-free period.

However, a reno loan may not be sufficient to cover the full cost of renovations. The cap on reno loans is often six months of your income, to a maximum of $30,000. This may not suffice to cover the entire cost of renovations.

As such, you may find a personal loan useful if:

  • The contractor goes beyond the given budget
  • Something goes wrong and you are forced to change contractors
  • Unusual situations where personal loan promotions beat reno loan rates

1. The Contractor Goes Beyond the Given Budget

It’s not uncommon for contractors in Singapore to bust their budget. Always assume the renovation will cost 20 per more than the projected amount. When your reno loan proves insufficient, you can use a personal loan to make up the difference.

2. Something Goes Wrong and You Are Forced to Change Contractors

Hopefully this never happens to you, but not all contractors are good. If your contractor closes down before work is finished, or you dislike their work and fire them, you need to inform your bank (particularly if they’ve disbursed the whole loan amount to the contractor).

For this reason, we advise that you avoid paying the contractor the whole sum at once (offer to pay half now, and half when the work is done).

If you cannot get a reno loan – as you’ve already used it it pay your former contractor – you can look at personal loan options instead.

3. Unusual Situations Where Personal Loan Promotions Beat Reno Loan Rates

Sometimes personal loans come with promotions, such as 0% interest for six months. If you feel you can fully pay for the renovations in that time (and can borrow a sufficient amount), you may want to use the personal loan instead. However, do be sure to pay it off on time, or else the higher interest rate could mean paying more than a reno loan.

You can compare different personal loans at

Not Sure Which Personal Loan to Get?

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