Should you use a personal loan for home renovations?

Couple meeting up with lender to discuss renovation loan in Singapore.
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Should you use a personal loan for home renovations?

checking blog post using mobile
Couple meeting up with lender to discuss renovation loan in Singapore.



Buying a house is probably one of the biggest expense you will incur in your life, but it is also a source of pride for many people. So if you’ve just bought your first home, congratulations! Your next step is likely to be browsing through the beautiful pictures of home renovations and deciding on how you want the home of your dreams to look like, but you also know you are constrained by budget, so what can you do?

Whether you are buying a resale HDB, an old condominium or a new Executive Condo, some form of renovation will usually be required. However, there’s always a way to keep cost low if you are cost-conscious.

How much would I expect to spend?

If you have bought a resale HDB, renovation cost will be on the higher side, typically ranging between $30,000 to over $50,000. For new BTO, you can expect between $15,000 to $50,000.

The amount can seem a bit much, especially when you’ve just burned a huge hole in your pocket with the downpayment you’ve paid for your flat. However, you also want to do the renovations before you move in so that you do not have to deal with the dust and noise when you are financially ready to renovate.

There are 2 things you can do here – either try to save as much as you can with a low budget or take up a loan to help finance the renovations.

2 ways of financing home renovations

You can choose to take up a renovation loan or a personal loan to finance your home renovations. But what’s the difference?

Both loans may look similar at first glance – they offer tenures between1to 5 years and provide loans of up to 6X your salary or $30,000. But there are some key differences between the 2 that can better help you decide which one is more suitable for your needs.

Higher interest rates – do you know that the more specific the type of loan, the lower the interest? For instance, a mortgage loan is probably one of the cheapest you’d find in the market. The same goes for the renovation loan – most renovation loans in the current market are at an effective rate of 5 to 8%. On the other hand, personal loans from banks are at around 8 to 20% per annum. But of course, there are some other factors that you’ll need to consider instead of just choosing the lowest rate loan.

Restriction on how you can use the money – Personal loans are disbursed as cash, which allows you to use the money as you wish. On the other hand, renovation loans only allow you to use it for certain types of payments, such as:

  • Electrical and wiring works
  • Built-in cabinets
  • Painting of walls
  • Structural alterations
  • Flooring and tiling
  • Bathroom fittings

This means that you will not be able to use the renovation loan to pay for home furnishings and appliances which can also be an important part of your overall cost.

So if a personal loan is much more expensive, why would one use it for home renovations?

  1. Your renovation loan is insufficient

Since you might need some $50,000 for home renovation and your loan only offers up to a maximum of $30,000, the money may be insufficient. As such, you may find a short-term personal loan successful in helping you bridge the gap, but be sure that you can make timely repayments!

  1. You needed to change contractors halfway

It is not uncommon to hear of horror stories of bad quality work done by contractors or worse, those that close down before the work is done. As such, you might need extra funding, so a personal loan can help here.

In terms of cost effectiveness, taking a renovation loan always makes more sense than using a personal loan, but depending on circumstances, a personal loan can come in handy. Just remember to borrow prudently!


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