Summary

  • Many people choose to renovate their home as a way to potentially increase their property’s value.
  • If you cannot or prefer not to pay in cash upfront, you could consider funding a renovation project by taking out a personal loan.
  • Personal loans generally have lower interest rates than credit cards but higher rates than home loans.
  • Keep in mind that renovating your property does not necessarily guarantee that your home’s value will go up. Also, not every type of renovation will help bring up the value of your home.

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12.99%

Variable

13.86%

ANZ

$1011

36 months

1 year to 7 years

3.06

/ 5
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12.69%

Fixed

13.56%

NAB

$1006

36 months

1 year to 7 years

3.02

/ 5
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12.69%

Variable

13.56%

NAB

$1006

36 months

1 year to 7 years

3.10

/ 5
More details

Learn more about personal loans

From large-scale makeover projects to smaller DIY projects, home renovations could increase the overall value of the home by making it more modern or functional. Not only that, but you or your tenants can also enjoy a newly refurbished home.

A personal loan is one way to fund your home renovation project. You should be aware of a personal loan’s features and fees before deciding on which loan is best for you. It is always wise to research different types of loans and compare multiple options before settling on your final choice.

Why use a personal loan for a home renovation?

It’s not uncommon for people to borrow money for a renovation because they don’t have enough cash available. There are several different ways that you can fund a home makeover if you are unable to or prefer not to pay in cash, including personal loans, credit cards and redrawing on your current mortgage. The total project cost will be different depending on how you decide to fund it.

The advantage of taking out a personal loan to complete your home renovation is that personal loans often charge lower interest rates than credit cards, especially if you take out a secured personal loan. This can help keep the long-term costs of borrowing money to a minimum.

Using a personal loan also minimises the time spent paying back the loan, which may mean less total interest paid on the loan. In contrast, when redrawing funds from your home loan to use for a renovation, you could be paying more interest over time, despite the home loan’s lower interest rate. This is because the loan amount will be paid back over your home loan’s term, which is typically much longer than that of a personal loan.

But be aware of the potential costs attached to taking out a personal loan for a home renovation. For starters, personal loans will always charge you interest and some may also charge upfront and/or ongoing fees on top of the interest. Importantly, completing a renovation to your property does not necessarily lead to an uplift to the home’s value.

What are the pros and cons of taking out a personal loan for a home renovation?
  • Personal loans generally have lower interest rates than credit cards.
  • Some lenders offer features to make the loan more flexible for borrowers, e.g. the ability to make extra repayments.
  • Usually borrowers may pay back the loan over a fixed term of typically three to seven years.
  • Fees are usually charged to set up and keep the personal loan.
  • Personal loans generally charge higher interest rates than home loans.
  • Not all personal loans will be flexible and some may charge you fees for paying off the loan early.
  • There is a chance your property’s value will not increase despite taking out a personal loan and undertaking a renovation.

What features of a personal loan should I know about?

Finding the right combination of personal loan features could help you secure a loan that is suited to your own personal financial situation. 

  • Secured personal loan - This is a loan where you offer up an asset as security that the bank will sell if you fail to make the payments on your loan. As there is an added layer of security for the bank, these loans may offer lower interest rates than unsecured personal loans.
  • Fixed and variable interest rates - Personal loan interest rates come in both fixed and variable forms. Fixed loans will have one interest rate that keeps your monthly repayment amount steady over the loan term. Variable personal loans generally have a lower interest rate than fixed loans but will be subject to rate rises according to market conditions. The option that will best suit you may depend on if you require your monthly repayment amount to be consistent and how much room there is in your budget for fluctuation.
  • Fees - Personal loans will also charge varying fees that you should be aware of before you sign on to the loan. These could include upfront fees as well as ongoing fees. You should ask your prospective lender for a summary of all the costs involved in taking out the loan you are interested in before you commit to anything.
  • Extra repayments - Finding a loan that allows you to make extra repayments and pay off the loan early will give you more control over how long you have the loan for and how much you pay in interest by the end of the loan. You will find that the faster you can pay down the loan, the more you will save over time. But some lenders will charge you break fees if you pay off your loan earlier than specified. You can investigate different loan terms and the amount of interest you might need to pay with these loan terms using RateCity’s Personal Loan calculator

How can I use a personal loan to add value to my home?

Using a personal loan to renovate your property can be a good way to increase its value. By updating a kitchen or adding an outdoor area to your home, you could potentially be boosting your property’s resale value.

It is important to remember that not all home improvements will add value to your home. If this is your primary goal, then you should research what type of renovation could make your home more attractive to buyers. It is generally agreed that a refurbished kitchen or bathroom are most likely to add value to an older property.

Minor home improvements could also bring up the value of your home without being too expensive or disrupting living arrangements of residents. Things like replacing old carpet in bedrooms or adding a fresh lick of paint could help boost the value of your home.

Keep in mind that not every type of renovation will help bring up the value of your home. For example, painting the walls dramatic colours or adding fixtures and fittings that may not be to everyone’s taste could turn away both buyers and tenants.

Frequently asked questions

Can you refinance a $5000 personal loan?

Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

Should I get a fixed or variable personal loan?

Fixed personal loans keep your interest rate the same for the full loan term, while interest rates on variable personal loans may be raised or lowered during your loan term.

A fixed rate personal loan keeps your repayments consistent, which can help keep your budgeting consistent. You won't have to worry about higher repayments if your rates were to rise. However, on a fixed loan you’ll also potentially miss out on more affordable repayments if variable rates were to fall.

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan. However, the process is easier and faster than taking out a mortgage.

Loan sizes typically range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

What is the average interest rate on personal loans for single parents?

Like other types of personal loans, the average interest rate for personal loans for single parents changes regularly, as lenders add, remove, and vary their loan offers. The interest rate you’ll receive may depend on a range of different factors, including your loan amount, loan term, security, income, and credit score.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.

Do student personal loans require security?

While some personal loans can be secured by the value of an asset, such as a car or equity in a property, student personal loans are often unsecured, which typically have higher interest rates.

Some lenders also offer guarantor personal loans to students. These loans have lower interest rates, as a guarantor (usually a relative of the borrower with good credit) will fully or partially guarantee the loan, taking on the financial responsibility if the borrower defaults.

What do single parents need for a personal loan application?

Much like applying for other personal loans, applying for personal loans for single parents will likely require the following:

  • Proof of identity
  • Proof of residence
  • Proof of income
  • Details of assets (e.g. car, home)
  • Details of liabilities (e.g. credit cards, other loans)
  • Loan amount
  • Loan term

How much can you borrow with a bad credit personal loan?

Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans, they also get loaned less money. Each lender has its own policies and loan limits, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

How can I get a $3000 loan approved?

Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.

Can I get a $4000 personal loan if I’m unemployed or on Centrelink?

Before most providers of personal loans or medium amount loans will approve an application, they’ll want to know you can afford the loan’s repayments on your current income without ending up in financial stress. Several lenders don’t count Centrelink benefits when assessing a borrower’s income for this purpose, so these borrowers may find it more difficult to be approved for a loan.

If you’re unemployed, self-employed, or if more than 50% of your income come from Centrelink, consider contacting a potential lender before applying to find out whether they accept borrowers on Centrelink.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.

How long does it take to get a $5000 loan?

Depending on the lender, personal loans and medium-amount loans for $5000 can sometimes be approved in under an hour, and give you access to the money the same day. Other loans may take 24 hours or longer to assess your application, and you may not get the money for a few days.

How long will I have bad credit?

Most negative events that appear on a person’s credit file will stay in their credit history for up to seven years.

You may be able to improve your credit score by correcting errors in your credit report, clearing outstanding debts, and maintaining good financial habits over time.

How can I improve my credit rating/score?

Your credit score will improve if you demonstrate that you’ve become more credit-worthy. You can do that by minimising loan applications, clearing up defaults and paying bills on time.

Another tip is to get the one free credit report you’re entitled to each year – that way, you’ll be able to identify and fix any errors.

If you want to fix an error, the first thing you should do is speak with the credit reporting body, which may take care of the problem or contact credit providers on your behalf.

The next step would be to contact your credit provider. If that doesn’t work, you can refer the matter to the credit provider’s independent dispute resolution scheme, which would be the Australian Financial Complaints Authority (AFCA).

AFCA provides consumers and small businesses with fair, free and independent dispute resolution for financial complaints.

If that doesn’t work, your final options are to contact the Privacy Commissioner and then the Office of the Information Commissioner.

How are credit ratings/scores calculated?

Different credit reporting bodies may use different formulas to calculate credit scores. However, they use the same type of information: credit history and demographic profile.

They’re likely to look at how many credit applications you’ve made, which lender the applications were for, what purpose they were for, how much they were for and your repayment record. They’ll also look at your age and postcode. They’ll also look to see if you’ve had any bankruptcies or other relevant legal judgements against you.

Your score can change if your demographic profile changes or new information is added to your file (such as a new loan application) or existing information is removed from your file (i.e. because it has reached its expiry date).

What do single mothers need to apply for a personal loan?

Like other personal loan applicants, single mothers will likely need to provide a few documents to any potential lender, such as personal identification, bank statements (savings, loans, credit cards), proof of address, and proof of income (payslips, tax returns).

What documentation is needed for a self-employed personal loan?

Personal loans may require a borrower to provide proof of identity, proof of residence, details of any other outstanding loans (including credit cards), details of assets they own (e.g. savings, car, property), and proof of income.

While borrowers in full-time or part-time employment can often provide payslips and similar documents to prove their income, self-employed borrowers may need to provide other documents, such as bank statements or tax returns, to demonstrate that their income can cover a loan’s repayments.

Can single mothers get personal loans online?

Many lenders offer online applications for personal loans, which can be convenient for borrowers who have busy lives. If you’re not confident your personal loan application will be approved, you may want to consider contacting the lender by email, live chat, phone, or by visiting a branch, to discuss your situation before applying.

Can I get a self-employed personal loan with bad credit?

It may be much more difficult for a self-employed borrower to successfully apply for a personal loan if they also have bad credit. Many lenders already consider self-employed borrowers to be riskier than those in full-time employment, so some self-employed personal loans require borrowers to have excellent credit.

If you’re a self-employed borrower with a bad credit history, there may still be personal loan options available to you, such as securing your personal loan against a vehicle of equity in a property, though your interest rates may be higher than those of other borrowers. Consider contacting a lender before applying to discuss your options.