Can I Get a Renovation Loan?

Looking to add value to your home with renovations and thinking of applying for a renovation loan? Before you apply, it’s important to understand what renovation loans you can apply for and how they work. Read on for more information or contact our friendly personal loan brokers at Oceania Finance today.

What type of home renovation loans can I apply for and how do they work?

Renovation loans are predominantly unsecured. Though some lenders, like Oceania Finance, may offer both unsecured and secured loan options. Unsecured loans often have a higher interest rate and a lower borrowing power as they don’t require any type of asset as collateral. While a secured loan typically offers lower interest rates and a higher borrowing power as it is guaranteed by an asset.

To decide which is right for you, it’s important to research and compare all your options. Using a comparison site can be a good way to get a broader understanding of the current loan market. It’s important to remember that these websites are often sponsored by other companies and this will influence their comparison results and recommendations. Government websites such as Moneysmart can offer more impartial guidance on personal loans and how to compare them.

Feeling confused or overwhelmed by all the information and choices that are out there? Consulting a loan broker can help you navigate the process of finding the best option for you.

What can I use a renovation loan for?

A renovation loan is used to improve your home or undertake repairs around your property. Popular ways people can utilise their renovation loan include:

• Kitchen remodels
• Bathroom renovations
• Adding an extension or room
• Adding a swimming pool
• Solar installations
• Repainting the interior and/or exterior of the home
• Landscaping
• Updating fixtures

Before applying for a renovation loan, you should take time to consider what is a priority for you and your home. Doing this will help you determine not just how much you will need to borrow but also what type of loan would suit you best.

Am I eligible for a renovation loan?

When applying for any kind of loan, each lender you look at will have different eligibility criteria. That’s why it’s important to carefully consider the requirements before you apply to make sure you have the best chance of approval. Some of the standard eligibility requirements for a loan are:

• Be 18 years old or over
• Be a permanent Australian resident or hold a valid visa
• Have not filed for bankruptcy
• Have a regular income and demonstrate financial stability

Loan brokers make this process easy by assessing your eligibility likelihood before you apply for any finance. They quickly compare lenders to provide you with the best recommendation for your needs and circumstances.

How much can I borrow?

Every lender has their own borrowing thresholds depending on their eligibility criteria. Generally, the limit for a renovation loan sits between $50,000 to $75,000. At Oceania Finance, you can borrow up to $65,000, depending on your individual circumstances.

How long will I have to repay my loan?

Depending on the amount you borrow and your individual circumstances, loan terms can be either 3, 5, or 7 years. And repayments can occur either weekly, fortnightly, or monthly.

Can I get a renovation loan without equity?

An unsecured loan allows you to get a renovation loan without providing any equity or assets to use as collateral. However, it is important to remember that unsecured loans typically have higher interest rates and lower borrowing power.

How can I get a renovation loan?

The process of getting a renovation loan will differ depending on each lender and your individual circumstances. However, generally the process will involve the below steps.

Step 1: Determine what you want to do and how much you need to borrow

Before you begin researching lenders and loan options, you will first need to establish what your goals are and how much money you will need to achieve those goals.

Step 2: Research your loan and lender options

Look for lenders that offer renovation loans. This could be traditional banks, credit unions, or online lenders. Compare their terms, interest rates, and fees to find the best option for you.

Step 3: Check your credit score and eligibility

Each loan type has its own eligibility criteria, such as credit score requirements, income limits, and property eligibility. Checking your credit report and your eligibility before applying for a loan you may not be eligible for can help you avoid damaging your credit score.

Step 4: Have your documentation ready

Prepare the necessary documents for your loan application, this will can include:

• Proof of identity
• Proof of income
• Information on any existing debts you may have
• Details of your renovation including cost estimates

Step 5: Apply for the loan

Once you’ve chosen a lender, submit your loan application along with all the required documentation. Depending on the lender, you may be able to apply over the phone, online, or in person.

Step 6: Review and sign

Review the terms and conditions of your loan. Then, if you agree to the terms and conditions, sign the contract.

Step 7: Repay the loan

Once you have received the funds, you will need to begin making the necessary repayments according to the terms and conditions of your loan agreement.

If the process of researching and comparing lenders seems daunting, it may be time to consult a loan broker, like our experienced team at Oceania Finance. A loan broker can take the stress out of applying for a loan by doing the hard work for you, such as researching and comparing lenders. Using a loan broker can help you cut through confusing jargon and complicated terms to ensure you’re getting the right solution for your needs. Contact our friendly team today!

Questions to ask when comparing renovation loans

What is the comparison rate?

The comparison seeks to reflect the true cost of the loan by combining the interest rate and any other fees and charges.

What is the interest rate?

The interest rate is the amount the lender charges you for borrowing money and is a percentage of the amount loaned.

Is there an application fee?

The application fee is a once-off fee the lender may charge when you first apply for the loan.

Are there fees for extra payments?

Some lenders may charge you a fee for making additional payments in order to repay your loan faster.

Are there any other fees?

Some loans may incur other fees such as a monthly service fee or a default fee. It is important to read the terms and conditions to find these.

What can I use the loan for?

Some loans have restrictions on what they can be used for. It’s important to ensure you can use the loan for what you need.

What is the loan term/repayment period?

Check the loan terms and length before applying. Some lenders offer flexible repayment options and a negotiable interest rate, while others do not.

Other ways to finance your home renovations

You may or may not want to finance your whole renovation through a personal loan. There are a number of other finance options that you can also use to pay for home improvements.

Savings

If you’re concerned about committing to a large loan debt, then using your savings can be a cost-saving solution. However, it’s important to remember that home renovations often go over budget when unforeseen issues arise. So keep in mind that while your savings could cover the initial costs, you may end up needing more finance down the road.

Credit cards

Credit cards can offer spending freedom, but it’s important to note that the interest rates are often far higher than that of a personal loan and it can be easy to overspend.

Home equity loans

You may be eligible for a home equity loan if you already have a mortgage home loan and you’ve built up enough equity on the value of your property.

Refinance your home loan

If you already have a home loan, you may be eligible to refinance this and to access more funds for renovations.

Construction loan

This type of home finance provides the funds in increments instead of as a lump sum at the start. Typically, the lender will draw down from your loan and pay the builder directly according to the contracted payment schedule.

Need advice on how to finance your renovation?

With extensive industry experience and a wide range of contacts, our personal loan brokers are here to help! We offer a personalised service and work hard to get the best rates and terms for your circumstances.

Contact our expert personal loan brokers today to get started.