How a Renovation Loan Works in Singapore

A renovation loan in Singapore is a bank loan you can only use for renovating your home. You can borrow up to the lower of six times your monthly income or S$30,000, repay it over up to five years, and the bank usually disburses the money straight to your renovation contractor.

It is cheaper than a personal loan because it is purpose-tied, but the headline interest rate hides the real cost. Here is how it actually works, so you can borrow with your eyes open.

How does a renovation loan work in Singapore?

You apply to a bank, show a renovation quote or invoice, and if approved the bank disburses the funds, often by cashier's order made out to your contractor. You then repay in fixed monthly instalments over the loan tenure. Because the loan is tied to renovation, you cannot use it for furniture, appliances or anything outside the works.

It is designed for the kind of spend covered in our renovation services, the hacking, carpentry, tiling, electrical and plumbing that make up the bulk of a project.

How much can you borrow?

The cap is the lower of two numbers:

• Six times your monthly income, or
• S$30,000, whichever is smaller.

What is the real interest rate? (EIR vs flat rate)

This is the part most people get wrong. Banks advertise a flat rate, often somewhere from about 2.8 to 4-plus percent. That flat rate looks low because it is charged on the full original amount for the whole tenure, even as you pay the balance down.

The number that reflects what you actually pay is the Effective Interest Rate (EIR), which is usually closer to 5 to 7 percent or higher. Always compare loans on the EIR, not the flat rate, and factor in the one-time processing fee, typically around 1 to 2 percent of the loan. Rates change often, so confirm the current EIR with each bank before deciding.

Who is eligible, and what do you need?

Exact criteria vary by bank, but generally you need to be a Singaporean or PR, at least 21 years old, and meet a minimum annual income (commonly around S$24,000, though some banks ask for more). You will typically provide your NRIC, income documents such as recent payslips or your CPF contribution history, and a renovation quote or invoice from your contractor.

Renovation loan vs personal loan: which should you use?

For renovation spending, a renovation loan is almost always cheaper because the lower, purpose-tied rate beats a general personal loan. The trade-offs: a renovation loan can only be used for the works and is capped at S$30,000, while a personal loan is flexible and can be larger but costs more.

A common approach is to use a renovation loan for the contracted works up to the cap, and cover furniture or appliances separately. If your renovation runs well past S$30,000, you may combine the loan with savings rather than stretching to a pricier personal loan.

How to apply for a renovation loan

The process is short:

• Get an itemised renovation quote from your contractor.
• Compare banks on the EIR (not the flat rate) plus the processing fee.
• Apply with your NRIC, income documents and the quote.
• On approval, the bank disburses to your contractor and your monthly repayments begin.

Frequently asked questions

How much renovation loan can I get? Up to the lower of six times your monthly income or S$30,000.

Is the flat rate the real cost? No. The Effective Interest Rate (EIR) is the true cost and is meaningfully higher than the advertised flat rate. Compare loans on the EIR.

Can I use a renovation loan for furniture? No. It is restricted to renovation works. Furniture and appliances must be funded separately.

How long can I take to repay? Renovation loans typically allow a tenure of up to five years.