Should You Get a Personal Loan for Home Improvement & Renovation?

(This article was originally published on the 27th October 2017 and updated on the 27th November 2020).

Home renovation is one of the most exciting endeavours house owners undertake on a periodic basis to beautify, remodel or expand their existing dwellings. For some, it is the ‘project of a lifetime’. Minor repairs or refurbishments need little preparation. However, for major home makeovers, there is plenty of planning required. It is not limited to design or construction but also clever financial planning.

If this is your first time on planning to get a personal loan for home improvement or renovation, don’t worry. We have listed an easy guide for you to follow through.

Guide to Use Personal Loan for Home Improvement/Renovation

This step-by-step guide is a sure-fire way to turn your home renovation concept into reality. You can expect a problem free project, from conceptualisation and construction, up to funding support.

1. Project Concept

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The idea of home renovation usually comes when the owner feels that his or her house needs a major overhaul. It can be in the form of expansion, remodelling or complete ‘newness’ that would change the overall ambience. Once the concept is firmed up, the planning begins. To visualise better, you can look up on Pinterest for design inspirations. From contemporary design to minimalist, scandinavian, traditional, Balinese, industry, and more.

2. Project Costing

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Some home renovation projects would need the services of an architect to design the concept. If perfecting the design would not demand professional help, then you can save on expense by securing only the services of a contractor to do the job.

Look for a contractor that is qualified, reliable, has an efficient management and most importantly quality past work. Do a background research on the company and read reviews from other previous customers.

You can also have a couple or more contractors to survey your house on estimating how much the home renovation project would cost. Review each proposal and compare them. Look at the bill of materials, labour costs and related expenses, including bonds, permits and other incidental charges.

3. Select the Contractor Budget Preparation

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The proposals will provide you an estimate of the total project cost or at least the price range. Make sure that the time frame for completion is also included. That will indicate how long the inconvenience will last while the renovation is ongoing.

The selection of the contractor is crucial. The low priced quotation might not necessarily turn out to be of quality work as compared to the expensive offer. Always seek out recommended contractors to have that level of comfort by ensuring that the quotation price matches with the quality of work to be done.

In any case, this is optional but would be wise to draft out a House Renovation Contract that states the terms and conditions of the renovation work. This contract acts as your protection in case of any disputes with the contractor.

4. Budget Preparation

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When you have decided on the project contractor, then assess your cash position. See if you can set aside a budget to meet the stipulated project cost. If the cost is too steep to pay at the moment, you can decide to defer the project at a later date.

You can also opt to do the project on a piecemeal basis or phase-by-phase construction in order not to disrupt your financial situation. Since a major home renovation project would involve a huge amount, carefully evaluate the funding support or the type of loan facility you would need.

5. Decide on Funding Support

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With the contractor selected and the total project cost calculated, you can decide the best funding support to begin the project. If the renovation cost is really high, a mortgage loan or home refinancing facility is a good option. The advantages are a higher loanable amount, lower interest rate, longer repayment period and affordable monthly amortization.

However, if you want to secure a loan package without having to offer a collateral, then a personal loan is your best option for funding support. This is the reason why many Malaysians prefer this type of loan because of its advantages. Applying for a personal loan is less complicated and the faster processing time favours the borrower who is eager to start the home renovation. Some personal loan providers even offer Shariah concept financing. Just make sure that you apply with a trusted loan provider.

Still unsure if you should take out a personal loan to renovate your home? Here is our take on the advantages and disadvantages to help you decide better.

Advantages of using Personal Loan for Home Renovation

1. It can be considered a ‘good debt’

There is such a thing as good and bad debt. Borrowing for a renovation can be a good debt if it will increase the value of your home. In fact, certain changes like remodelling your kitchen, landscaping and adding space to your home can help drive up its value.

2. Upgrading can save you money

Upgrading your home with green technology like solar panels, energy-efficient lighting and heat-deflective roofing will hurt at first because its quite expensive. But in the long run, you will get to save some money. For instance, you can save on your utility bills as well as heating and cooling appliances. You might also want to renovate to upkeep and maintain the home so you can avoid major, costly damage later on. 

3. Improve the standard of living and safety

Some renovations are not aren’t necessary but it can add to how comfortable you are in your home and that should factor into your decision as well. On the other hand, home improvement projects that improve safety is an absolute necessity!

Disadvantages of using Personal Loan for Home Renovation

1. Possibly higher interest rates

It is true that a refinancing loan or renovation loan itself could offer lower interest rates. But do keep in mind that you will essentially be taking on a new home loan and be pledging your property as collateral.

2. Living above your means

This is a concern that most people have with borrowing to make home improvements. You might be tempted to make changes to your home that are unnecessary or that you can’t afford and incur unnecessary debt as you go along.

How to Decide?

At the end of the day, there is no definite answer as to whether is it a smart choice to take up a personal loan or not. However, if you are still having a little trouble figuring out if you should apply for a personal loan to fund your home renovation project, don’t worry, here are some helpful hints.

Consider a personal loan for renovation if:

  • You don’t need a huge sum and are only making minor renovations to your property
  • The loan comes with very low interests and affordable repayment plans
  • You need the money for emergency home repairs
  • You are looking for a convenient loan that is flexible and easy to apply

Look for other financing options if:

  • You are doing major renovations and require a large sum of money (more than RM100,000)
  • You can wait for the loan funds
  • You don’t mind using your home as collateral

Lastly, you might want to hold off on renovations if you can’t afford repayments for either type of loan. In this case, it’s best to play it safe, save up and renovate with cash. Other suggestions that you may be able to make are small modifications or try to do it yourself (DIY). An example of a store that sells hardware at affordable prices is Mr.DIY.

Need a funding for your home renovation?

Check your loan eligibility for free with Direct Lending and we will help you realise your dream home. We are a personal loan platform catered especially for the civil servants. Our personal loans from bank & koperasi are also Shariah compliant. Rates are as affordable as 2.75% and as fast as 2 working days!

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