Using a short-term personal loan to pay for home renovations

By Rhianna Dews · · 3 min read
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Got a short-term home reno project in the works? Whether you’re redoing the tiles in the bathroom or upgrading your kitchen benchtop, a personal loan can be useful for a quick and relatively simple finance option to fund tweaks around the house.

There are many different ways to pay for a home renovation project. While dipping into your home loan redraw facility might seem like an obvious first choice, another option worth considering is taking out a personal loan to fund your project. But is it the right option for you?

Let’s take a look at some of the different pros and cons of paying for a home renovation project with a personal loan. But before we do:

What is a personal loan?

Before we get into the nitty-gritty, you might be wondering – what is a personal loan? A personal loan allows you to borrow a lump sum of money and then repay that amount (plus interest on top) in regular repayments over a set period of time (usually between 1 and 5 years). 

Personal loans are generally used for amounts between $2,000 and $100,000, which are too big to put on a credit card.

Pros of using a personal loan for home renovations

Here are some of the pros of using a personal loan to pay for a home renovation project:

  • Flexibility: Personal loans are a generally flexible loan type that can typically be used for most types of renovations, from minor updates to major revamps.
  • Faster funding: Once approved, the funds will typically land in your account quite quickly, often within a few days – meaning you can start your renovation project quicker.
  • Fixed-rate options: Most personal loans offer the choice of either a fixed or variable interest rate. Depending on your individual financial circumstances, opting for a fixed rate could be a good option if you’re after the certainty of knowing exactly how much your regular repayments are – making it easier to budget.
  • No collateral required for an unsecured loan: If you opt for an unsecured personal loan, you won't have to risk losing your home, car or other asset by using them as collateral against the loan – like you might with a secured loan.

Cons of using a personal loan for home renovations

Let’s take a look at some of the cons of funding a home renovation project with a personal loan:

  • Higher interest rates: Personal loans (especially unsecured loans) typically come with higher interest rates than other finance options, so they might be more expensive than using a home loan redraw facility, for example.
  • Smaller loan amounts: Personal loan amounts can be anywhere between $2,000 and $100,000, although it’ll depend on the lender. This might not be an issue if your project budget fits within this range – however, it could become a hindrance if you want to do more extensive renovations.
  • Shorter repayment terms: Personal loans typically come with shorter repayment terms (usually 1 to 7 years). This means that, depending on the size of the loan, your regular repayments could be quite high, potentially putting more strain on your budget.
  • Impact on credit score: Taking out a loan is marked on your credit report. Any late or missed payments can also negatively impact your credit.

A personal loan can be a convenient and flexible option for financing home renovations; however, as with most financial products, it comes with a range of pros and cons. The finance option that’s best for you will ultimately depend on your specific circumstances.

Before making a decision, be sure to compare different loans, lenders and other finance options – and remember to consider your financial situation and renovation needs.

Compare Personal Loans

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Last updated 13 December 2024 Important disclosures and comparison rate warning*
  • Low Rate Personal Loan

    Excellent Credit, $5,000 - $75,000

    interest rate
    comparison rate
    Monthly repayment
    6.57% p.a.to 8.39% p.a.
    7.19% p.a.to 8.75% p.a.based on $30,000
    over 5 years

    Competitive low rates for borrowers with excellent credit on 1-7 year loans from $5,000 up to $75,000, plus free extra repayments. Winner of Mozo's Experts Choice Excellent Credit Unsecured Personal Loan 2024 and Excellent Credit Secured Personal Loan 2024 awards ^. Min. income of 25k after tax, to apply.

    Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 6.57% would cost $35,528.12 including fees.

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  • Unsecured Personal Loan

    interest rate
    comparison rate
    Monthly repayment
    6.56% p.a.to 21.99% p.a.
    6.56% p.a.to 22.79% p.a.based on $30,000
    over 5 years

    Competitive fixed rates for borrowers on 1-7 year loans from $5,000 up to $50,000. $0 monthly fees and no early repayment fees to pay. Fast application process on the Revolut app. According to Revolut and subject to loan approval, you'll receive your money into your Revolut account straight away.

    Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 6.56% would cost $35,768.68 including fees.

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  • Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    6.75% p.a.to 26.95% p.a.
    6.75% p.a.to 26.95% p.a.based on $30,000
    over 5 years

    Borrow up to $50,000 unsecured. Perfect if you earn more than $22,100 p.a. and have good to excellent credit. Multi-year winner of Mozo’s Experts Choice Unsecured Personal Loan Award, 2021, 2022, 2023 & 2024^'

    Repayment terms from 2 years to 7 years. Representative example: a 5 year $30,000 loan at 6.75% would cost $35,430.23 including fees.

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  • Debt Consolidation Loan

    $5,000-$75,000

    interest rate
    comparison rate
    Monthly repayment
    6.57% p.a.to 18.99% p.a.
    7.19% p.a.to 19.39% p.a.based on $30,000
    over 5 years

    Competitive fixed rates on loans up to $75,000 depending on your credit score. Zero monthly account keeping fees, no exit fees and no early repayment fees. Make weekly, fortnightly or monthly repayments, over 1 to 7 years managed entirely online, at any time. Fast and easy, 100% online application.

    Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 6.57% would cost $35,528.12 including fees.

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  • Home Improvement Loan

    Excellent Credit, $5,000 - $100,000

    interest rate
    comparison rate
    Monthly repayment
    6.57% p.a.to 8.39% p.a.
    7.19% p.a.to 8.75% p.a.based on $30,000
    over 5 years

    Give your home a refresh with the 2025 Mozo award-winning provider OMM. Borrow up to $100,000 for loan terms 1-7 years. Flexible weekly, fortnightly or monthly repayment options. No monthly, early repayment or exit fees. Fast 100% online application.

    Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 6.57% would cost $35,278.12 including fees.

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Head to our personal loans hub to learn more about and start comparing personal loans today.

* WARNING: The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

^See information about the Mozo Experts Choice Personal Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.

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