Difference between renovation loan and personal loan in Singapore

 


In the context of Singapore, taking a renovation loan has some differences from a personal loan. The renovation loan is a specific type of loan for home renovation matters. If you do a search on renovation loan Singapore, this loan includes a makeover for the wall, floor tiles, ceiling, rooms, kitchen and bathrooms. Part of the renovation loan also encompasses installation of electrical fittings and paintwork. A financial plan for your home renovation is specific, whereas a personal loan is a fixed amount of money which can be used for any purpose.

Here are some differences between renovation loans and personal loans to note in Singapore:

Interest rate

Normally, renovation loans in Singapore have lower interest rates than personal loans. The mean interest rates of renovation loans are between 3% and 4%, whereas those of personal loans are higher. Also, the calculated interests for personal loans are based on the original principal loan amount, whereas for the renovation loans, the interests are calculated based on the outstanding balance of the loan, depending on how much you have paid for the loan so far.

Maximum loan

The maximum loan or loan ceiling also differs between the renovation loan and the personal loan in Singapore. Renovation loans typically have lower loan ceilings than personal loans.

You can borrow up to 6 times your monthly income from a licensed moneylender for a personal loan. Your income must be at least $20,000 yearly.

For a renovation loan, the loan ceiling is $30,000 or 6 times your monthly income. 

Minimum salary requirements

If you wish to get a renovation loan in Singapore, you and your joint applicant must satisfy a minimum annual salary of $24,000 and $12,000, respectively.

For a personal loan, there is no requirement on minimum salary. However, how much you can borrow for a personal loan in Singapore depends on the salary range your income falls into.

Loan tenure

The loan tenure for personal loans tend to be longer than that of renovation loans in Singapore. Typically, you can take up to 7 years to repay your personal loan, while it must take a period of 1 to 5 years in Singapore to repay your renovation loan. But with longer repayment period does come with higher interest costs too.

Flexibility in spending

A renovation loan taken has some restrictions in the spending rules. As it is specifically for renovation of homes, it cannot be used for the purchase of furniture or installation of curtains. The renovation loan only can be used for paintwork or electrical wiring and it cannot be used for buying a table or chair.

On the other hand, the personal loan can be used without restrictions. The personal loan usage is flexible enough for you to buy even whatever furniture you want to. The renovation loan will be sent directly to the renovation contractor or interior designer you need to select.

Since there are some highlighted differences between the renovation loan and personal loan in Singapore, it is important to note about how sound your finances are so that you can repay your loans on time. You do not wish to be debt ridden or even end up defaulting on the loan, leading to severe financial consequences. 

Read more about loan - https://en.wikipedia.org/wiki/Loan









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