Home renovations can sometimes overshoot your budget especially when you are quite creative with your renovations ideas. Or it could simply be that a new coat of paint and general spring cleaning doesn’t warrant a break of savings. At such times, you may need to look for alternative financing options to complete your renovation. A bank loan would be a helpful option.
This guide will help you know more about 2 types of loans that you can apply to meet your home renovation needs.
1. Renovation Loans
Some banks in Malaysia offer loans for home renovations and upgrades. These loans are often bundled together with housing loans and comes in the form of a package. You need to take up a housing loan in order to get financing for a renovation loan.
You need to fit the eligibility criteria for housing loans to be eligible for a renovation loan. The interest rate would differ from bank to bank. You can get up to 30% of backup funds for renovating or refurbishing your house. You can get a long tenure for repayment such as 10 years or more.
You need to start your loan repayment after a month of loan disbursement, though OCBC allows a period of 12 months to start paying for your loan.
Banks that offer renovation loans in Malaysia
- OCBC Bank: Renovation and Refurbishment Loan
- Maybank: MaxiHome Loan
2. Personal Loans
You can take up a personal loan to renovate your home. All the major banks in Malaysia offer personal loans. You need to produce proof of income and identity to apply for personal loans. Some banks offer long-term personal loans with tenures ranging from 5 years up to a maximum of 10 years.
The interest rate for personal loans would start from 8% p.a. and can go up to 18% p.a. though the effective interest rate would vary with each bank as per its terms. You can get personal loans under Islamic banking where profit rates are relatively lower when compared to conventional loans.
You can opt for short-term or long-term personal loans based on your budget and income. Personal loans also come with fixed or floating interest rates. Most banks have minimum income criteria for personal loans where the average income requirement is around RM3,000 per month.
Some banks do not impose any early settlement fee where you can settle your loan fully before the maturity date. Personal loans carry late payment fees so you have to make your minimum payments on time.
Personal loans are usually offered to Malaysian citizens and permanent residents.
Banks that offer personal loans in Malaysia
- Alliance Bank: CashFirst Personal Loan
- BSN: Aflah SPIK Personal Financing-i
- Bank Rakyat: Personal Financing-i Private
- CIMB: Xpress Cash Financing-i
- RHB: Easy-Pinjaman Ekspres
Things to consider
- Both renovation loans and personal loans carry interest and late payment charges. It is best to pay these loans on time to not incur any extra charges.
- A good credit score is vital to be eligible for either of these loans. A current loan or a history of late payments would affect your eligibility.
- Take out a loan only if you are able to repay it on time. A sufficient income is a must or else your home renovation would drown you in debt.
Whether you opt for a renovation loan or a personal loan, calculate your expenses first. Borrow the money that you need so that you do not waste the funds once you get it. Set up a budget to repay your loan on time. Remember, a good credit history will make it easy for you to apply for other financial products in the future.