With Singapore’s rising home prices, many homeowners choose to stay and take on home improvement projects rather than buy a new home that will fit their preferences. Are you one of the homeowners planning to update the look of their property? You may be surprised by the costs of making your dream home a reality.
A basic home renovation project for a 2-room HDB flat can set you back around S$40,000 to S$50,000. Meanwhile, depending on the size of your home, the materials used, and the contractor used, construction costs can go up to more than a hundred Singapore dollars.
Thankfully, there are plenty of financing options available, including a home renovation loan and a personal loan. A home renovation loan is solely meant to finance home improvement projects, but is it right for you?
Personal Loan vs. Renovation Loan
A renovation loan is created to finance approved renovation activities, such as electrical works, painting, and structural alterations. Note that you’ll need an official contractor’s quotation to get approval. A personal loan, on the other hand, can be used for a variety of purposes, such as paying for medical expenses.
| Renovation Loan | Personal Loan |
| Available to homeowners or family members; all income requirements must be met | Available to anyone who meets the minimum income requirements |
| Can only be used on approved renovation works, including • flooring and tiling • Built-in fixtures, like cabinets • Paintworks • Electrical works • Bathroom fittings • Structural alterations • External works within the compound of your property |
Can be used for any personal expenses.
You can use it to finance supplementary works not covered by the approved renovation works, such as buying new furniture and appliances |
| Banks: Interest rate is typically lower at around 3% to 4% p.a. and is based on the outstanding loan balance. Lender: Between 1% and 4% per month. |
Banks: Typically higher than renovation loans and is calculated based on the original loan amount. Lender: Between 1% and 4% per month. |
| Banks: The loanable amount is up to S$30,000 or 6x of your monthly income – whichever is lower Lender: Up to 6x monthly income if your yearly earning is at least S$20,000. |
Banks: The loanable amount will depend on the bank and your annual income. Some banks offer up to 10x your monthly income. Lender: Up to 6x monthly income if your yearly earning is at least S$20,000. |
| Banks and licensed money lenders require an official quotation from a renovation contractor or interior design firm | Both banks and licensed money lenders do not require any quotation |
| Banks: Minimum income requirements will depend on the bank or financial institution Lender: S$2,000 for Singapore Citizens or Permanent Residents; S$3,000 for Foreigners |
Banks: Minimum income requirements will depend on the bank or financial institution Lender: S$2,000 for Singapore Citizens or Permanent Resident; S$3,000 for foreigners |
| Banks: Loan tenure of between 1 and 5 years Lender: Maximum loan tenure is 12 months |
Banks: Loan tenure of between 1 and 7 years Lender: Maximum loan tenure is 12 months |
Personal loans and renovation loans are not created equal. There’s a huge difference between the two types of loans, especially if you’re taking them with a bank.
Renovation loans have lower rates and shorter loan terms which can lead to more affordable overall loan costs. You also need a contractor’s quotation to apply for a renovation loan. This means additional paperwork; however, it will ensure that you are borrowing only the amount you need.
Personal loans, on the other hand, are perfect if you want to boost your cash flow or want to tide over tough financial situations. You can also use personal loans for your wedding or to buy big-ticket items, such as furniture and appliances.
Still unsure what type of loan to get for your home renovation project? Let’s take a closer look at these two loans – what you can use them for, their features, and their pros and cons.
Personal Loan
A personal loan may be secured or unsecured. A secured personal loan requires collateral, such as your car or property. In contrast, an unsecured loan doesn’t require collateral to borrow money. However, there is a limit to how much you can borrow.
You can use a personal loan for a variety of purposes, such as paying for:
- Medical bills
- Credit card bills
- Emergency expenses
- Traveling
- Wedding
- Consolidating debt
Personal loans can be offered by banks, credit unions, or licensed money lenders in Singapore.
Features
| Banks | Licensed Money Lenders | |
| Maximum Loan Amount | Depends on the bank and your annual income | Up to 6x your monthly income; depending on your income level |
| Interest Rate | 3% to 6% p.a.(11% to 14% EIR) | 1% to 4% per month |
| Loan Tenure | Up to 7 years | Up to 12 months |
| Minimum Income Requirement |
Citizens or PRs: Annual income of S$30,000 Foreigners: Annual income of S$40,000 to S$60,000 *may vary depending on the bank |
Citizens or PRs: Monthly income of S$2,000 Foreigners: Monthly income of S$3,000 |
Pros
- No collateral needed
- Fixed monthly interest payments
- Minimal documents required
- The money is credited to your bank account upon approval
- You can use the funds for any personal needs without having to show proof
Cons
- You might end up using the funds for other purposes other than for home improvement works
- Higher interest rates could lead to a higher total cost of the loan
- Depending on the bank, you may need to meet high income requirements. This is especially true for foreigners since they need to earn at least S$40,000 a year to qualify.
Top 5 Personal Loans in Singapore
| Personal Loan | Interest Rate | Maximum Loan Tenure | Minimum Annual Income | Processing Fee |
| 3.48% p.a.(7.99% p.a. EIR) | Up to 7 years | S$20,000 | S$0 | |
| DBS Personal Loan | 3.88% p.a.(7.9% p.a. EIR) | Up to 5 years | S$20,000 | S$0 |
| UOB Personal Loan | 3.4% p.a.(6.42% p.a. EIR) | Up to 5 years | S$30,000 | S$0 |
| Citi Quick Cash Loan(New Loan Customers) | 3.45% p.a.(6.5% p.a. EIR) | Up to 5 years | S$30,000 | S$0 |
| HSBC Personal Loan | 4% p.a.(7.5% p.a. EIR) | Up to 7 years | S$30,000 | S$0 |
| 1 Fullerton Credit Personal Loan | 1% to 4% per month | Up to 12 months |
Citizens or PRs: Monthly income of S$2,000 Foreigners: Monthly income of S$3,000 for |
Processing fee of not more than 10% of the principal loan amount when the loan is granted |
Home Renovation Loan
A renovation loan is strictly meant to finance home improvement works on both new and existing homes. As such, there are restrictions on what you can use the renovation loan to pay for. Additionally, the funds will be disbursed to your renovation contractor or interior designer.
On top of that, applying for a renovation loan requires additional documents, such as a quotation from your renovation contractor. The bank or licensed money lender will want to know where you will use the funds. Banks are pretty strict about only using your renovation loan to pay for actual home renovation activities.
You can use renovation loans for:
- Flooring and tiling
- Built-in cabinets
- Paint works
- Electrical works
- Bathroom fittings
- Structural alterations
- External works within the compound of your property
Features
| Banks | Licensed Money Lenders | |
| Maximum Loan Amount | S$30,000 or 6x your monthly income | Up to 6x your monthly income; depending on your income level |
| Interest Rate | 2.88% to 5.8% p.a.(Upfront processing fee of 0.75% to 2%) | 1% to 4% per month |
| Loan Tenure | Up to 5 years | Up to 12 months |
| Minimum Income Requirement | S$24,000 to S$30,000 per year *may vary depending on the bank |
Citizens or PRs: Monthly income of S$2,000 Foreigners: Monthly income of S$3,000 |
Pros
- Lower interest rates compared to personal loans at 2.88% to 5.8% p.a.
- With banks, the funds are disbursed directly to your renovation contractor so you won’t be tempted to use them for other purposes.
- If borrowing from a legal lender, the cash is disbursed to you within the same day of application, perfect for when you need urgent funds.
- The approved loan amount will depend on the contractor’s quotation so you can avoid over-borrowing.
Cons
- You’ll need to get a contractor’s quotation signed by you and the contractor to be approved.
- You must be a homeowner or the homeowner must be involved in the loan
- You can’t use the loan for furnishings, appliances, or for other purposes other than home improvement works.
Top 5 Home Renovation Loans in Singapore
| Personal Loan | Interest Rate | Maximum Loan Tenure | Minimum Annual Income | Processing Fee |
| DBS Green Renovation Loan | 3.77% p.a.(4.91% p.a. EIR) | Up to 5 years | S$24,000 | 1% of the approved loan amount |
| CIMB Green Renovation-i Financing | 4.15% p.a.(4.64% p.a. EIR) | Up to 5 years | S$24,000 | 1.2% of the approved loan amount |
| OCBC Renovation Loan | 4.18% p.a. | Up to 5 years | S$24,000 | 0.5% (admin fee) of the approved loan amount |
| POSB Renovation Loan | 4.88% p.a. | Up to 5 years | S$24,000 | 1% of the approved loan amount |
| OCBC Eco-care Renovation (Monthly Rest) | 3.98% p.a. | Up to 7 years | S$24,000 | 0.5% (admin fee) of the approved loan amount |
| 1 Fullerton Credit Renovation Loan | 1% to 4% per month | Up to 12 months |
Citizens or PRs: Monthly Income of S$2,000 Foreigners: Monthly Income of S$3,000 |
Processing fee of not more than 10% of the principal loan amount when the loan is granted |
Note: If for some reason a traditional bank’s personal loan or renovation loan is not available to you, you can seek the financial assistance of a licensed money lender in Singapore. With a legal lender, you can borrow up to 6x your monthly income with flexible repayments. On top of that, you can get your loan approved in less than an hour, perfect if you need urgent funding.
Can I Use My CPF to Pay for a Renovation Loan?
Your Central Provident Funds (CPF) savings cannot be used for home renovations, improvement, or repair works. You are also not allowed to use your CPF to repay your renovation loan.
CPF is created for retirement purposes; thus, it cannot be used for home improvement purposes. However, you can use your CPF Ordinary Account to pay for your home loan in cash. Additionally, it can also be used for investments.
Closing
As you jumpstart your home renovation project, consider taking a renovation loan. This will give you access to lower interest rates – lower EIR, reducing your total cost of borrowing. Plus, if you’re taking out a renovation loan with a legal money lender, you can loan up to 6x your monthly income and receive approval within the same day.
Key Takeaways:
- Renovation loans can only be used on approved renovation works, such as electrical works, bathroom fittings, and structural alterations
- You can use personal loans to finance supplementary works not covered by the approved renovation works, such as furniture and appliances.
- When it comes to renovation loans, licensed money lenders, such as 1 Fullerton Credit, offer more flexible loan plans than banks with minimal documents required.
Want to start your home renovation but don’t have enough cash? 1 Fullerton Credit offers renovation loans at attractive interest rates with flexible repayment terms. The best legal moneylender at the heart of Singapore, 1 Fullerton Credit ensures fast and hassle-free loan applications. Request a quote today.
