Renovating in 2024? A personal loan could be what you need

Homeowners may spend thousands of dollars in home renovations to increase the value of their property.

And with kitchen remodels estimated at $30,000, smaller bathrooms at $25,000, and living rooms amounting to around $15,000, these renos can be costly. 

So, if home renovations are on your New Year’s to-do list but you need a bit of a cash boost to cover the expense, why not consider a personal loan?

Why use a personal loan for a home renovation? 

A personal loan is a great way to help cover a renovation as it allows you to  pay back your loan in smaller, more manageable repayments. Generally speaking, loan terms are anywhere between 1 to 7 years.

There are also two choices when it comes to deciding on a renovation loan: secured vs. unsecured and fixed vs. variable.

Currently in the Mozo database, the average rate for a secured personal loan of $10,000 sits at ^9.25% p.a. while the unsecured rate is a higher ^10.58% p.a. A secured loan requires you to put up an asset against the loan (such as a car or your home) in return for a lower interest rate. Alternatively, if you opt for an unsecured option you may receive a higher rate but don’t have to risk any of your belongings as security.

And what about fixed vs variable? Well, the choice is yours and will depend on what works better financially. 

Fixed rates offer more certainty around how much your regular repayment will be as you lock in your rate for the entire loan. The downfall is that sometimes these loans come with hefty exit fees if you pay down your loan early. A variable rate loan however generally comes with more flexible repayment options and no early exit penalty. There is an element of risk though, as your rate can change with the market - meaning it can go down but can also be hiked up at any time. 

Personal loans: 4 tips to setting your renovation budget

When renovating your home, it’s important to avoid going overboard and keep things within a realistic budget. While a swimming pool and tennis court might seem like a good idea at the time, you don’t want them to leave you swimming in debt for years on end.

Here are 4 tips to keep in mind as you renovate in 2024:  

• Renovate for profit: The primary thing to remember is that when you renovate your house, you may want to consider whether the changes will boost the value of your property for when you sell it. From removing walls to create a more ‘open-living’ space, to adding a granny flat, think about what potential buyers might want from the property you have. 

• Stay within budget and set a repayment plan: Have a clear idea of how much you want to spend and stick to it. Similarly, make sure you have money on hand, so you can make repayments on time. By doing this, you can avoid being slapped with late fees or default on your loan - potentially losing assets because of it.  

• Choose a flexible loan option: Being able to contribute a lump sum to your loan is handy in case you come into more money, such as a bonus at work. Make sure the loan option you are considering has features such as free extra repayments, so you can put additional funds towards your debt whenever you want.  

• Don’t fall into the DIY trap: If you aren’t a tradesperson, a DIY home reno is pretty risky. While the cost straight off the bat may be significantly less, the cost of repairs to any mistakes you make could outweigh the amount you’d pay for a professional.  

Want to start comparing loans for your reno? Check out some of the best personal loans tracked by our experts at Mozo this month, or browse some options on offer below.

^Rates are calculated using the best credit scores and are correct as at 5/12/2023.