Personal Loan

Building Dreams: Personal Loans For Home Renovation In Malaysia

Whether you are ready to sell your house or give it a facelift for the new season, renovating your home is an enormous endeavour. Thus, when considering a home improvement project, financial planning often ranks high on the list of concerns. Considering that current inflation rates are at their highest in years, this holds more true than ever before.

Meanwhile, financing a home renovation project is possible in several ways. However, taking a renovation loan in Malaysia is the most appealing for most people.

Hence, this detailed guide will explain how and where to find the best remodelling loans for Malaysian homeowners! You’ll also learn how to discover the best loan option at each stage and why some are preferable.

Understanding Personal Loan For Home Renovation

Regarding financing, a renovation loan is an excellent option for homeowners. Regrettably, most people are unaware that they even exist, let alone how they function.

So naturally, the first question most homeowners as is, what is a renovation loan?

What Is A Renovation Personal Loan?

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A home improvement loan is a type of second mortgage used to fund large and small home improvement projects. It’s a one-time payment with repayment terms stretching up to 10 years. The tenure maximum is 5 to 10 years depending on the nature of your employment. For private sector employees the tenure is 5 years, whereas for a public servant, loan tenure can stretch to 10 or even 12 years.

Renovation loans in Malaysia differ from other debts because you don’t have to be a real estate developer to start investing in your property. Instead, lenders base your loan amount on the expected worth of your house following renovations.

Additionally, compared to several popular financing alternatives like credit cards and other secured personal loans, its interest rates are cheaper based on your income and credit standing.

Differences Between Secured And Unsecured Loans

What is a secured loan?

A secured loan is backed by something of value (collateral). Mortgages and auto loans are the most widespread forms of secured loans, with the borrower’s home or car as collateral. However, any asset of sufficient value can serve as collateral. If you cannot repay the loan, the financial institution may take the collateral you provided as payment. Your credit record may reflect the repossession for seven years after the event.

Secured loans include the lender claiming the collateral you positioned for the loan. When the debt is fully repaid, the lender releases the lien, and you become the rightful owner of both assets.

Experian says that the following things can be used as collateral for a protected loan:

  • Real estate
  • Financial accounts, including money market, savings, certificate of deposit, and checking accounts.
  • Autos, trucks, sport utility vehicles, motorcycles, watercraft, etc.
  • Investments in equities, MFs, or bonds
  • Insurance policies, like life insurance
  • Expensive collections and other treasures (antiques, precious metals, jewellery, etc.)


What is an Unsecured Loan?

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You don’t have to put anything up as security for an uninsured loan, but you will still have to pay interest and fees. An unsecured loan can be credit card debt, personal loans, and student loans, among others.

Financial institutions approve borrowers for unsecured loans without collateral based on their creditworthiness and track record of making loan and debt repayments. As a result, unsecured loans sometimes (but do not usually) incur more interest rates compared to secured loans.

However, renovation loans in Malaysia are now secured while being personal loans meant for remodelling your kitchen, paying for a wedding, taking a dream vacation, or paying off credit card debt.

The vast majority of people who consolidate their debt do so with the assistance of a personal loan, which, compared to credit card interest rates, typically carries a lower annual percentage rate (APR).

Why Do You Want to Apply For A Personal Loan?

Home improvement projects in Malaysia are often financed through either cash-out refinances or home equity loans.

However, these aren’t explicitly designed for home renovation.

To qualify for a cash-out refinance or home equity loan, homeowners must have some equity in their property. As a result, while they may benefit long-term homeowners with significant equity, they could be better for first-time purchasers.

In Malaysia you can apply for unsecured personal loans or refinance equity as a finance option for your home improvement project. They are calculated using an estimate of your home’s after-renovation market worth.

This essential quality raises the amount you can borrow, enabling homeowners to access future equity while guaranteeing they obtain the best rate.

Estimated Amount For Personal Loans (Personal Loan Calculator)

To get a loan for your project, estimating the cost of home improvement is imperative. You need to know exactly how much you can spend and how much to borrow before starting. When calculating potential expenses, keep in mind the following five factors:

  • The first step is to determine the project’s scope, which should involve the cost of any necessary permits and any other incidental costs.
  • Calculate the cost of the materials by looking up pricing online or visiting nearby retailers; remember to factor in shipping expenses.
  • Investigate labour costs to establish the number of personnel needed and whether any specialised training or permits are needed.
  • Include any costs associated with the building, like tools, equipment rents, scaffolding, etc.
  • Consider unanticipated costs such as unplanned repairs or weather-related delays.

It’s also a good idea to set aside an additional 10% of the total budget for the project in case of unforeseen costs. Please make sure to include any necessary taxes and insurance payments in your calculations as well. Finally, having a trustworthy contractor familiar with financing for home improvements can assist in controlling expectations regarding both cost and duration.

Factors to Consider Before Applying for a Personal Loan For Renovation

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Money Currency Notes – Free photo on Pixabay – Pixabay

  1. Consider The Benefits of Your Renovation Project

Renovation loans should only be applied if the borrower is confident that the work will lower monthly repayments or raise the property’s value.

Here are some examples of well-known home improvement projects:

  • Getting your baths and front doors remodelled
  • Roof replacement
  • Windows Upgrades

Try not to put too much money into the remodelling. It is not in your best interest for the home upgrades to cause your property to become significantly more expensive than the other houses in the neighbourhood.

  1. Understand Your Budget

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Homeowners should clearly understand their budget and all the expenditures associated with their restoration project.

Knowing your spending limit will prevent you from blowing through your savings on home repairs and upgrades and defaulting on a loan for the work.

  1. Be patient

Finally, take your time renovating. Look into the costs, and keep in mind that remodelling is frequently more costly and lengthy than you might think.

Additionally, you should be confident that your finances can support the strain of a second mortgage.

With these at the back of your mind, you should also know banks look for certain traits when offering personal loans for renovation. Some of these factors include:

  1. Earnings And Employment Background

You should know that lenders only give you cash if you have a regular income. But are you aware that a bank is more concerned with your employment history than your income level?

Whatever the case, make sure you have all the necessary documentation, like pay stubs, EPF statements, and bank books, to back up your loan application. Attempting to forge them will only land you in hot water.

  1. Your Credit History

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Financial institutions rely heavily on your credit score to determine your level of risk. Banks may learn much about your financial situation through a simple credit check with CCRIS.

Lending institutions will also consider your track record of making timely payments on current debts. Whether it’s your credit card debt, auto loan, or utility bill, a history of late payments might signal that you’re an irresponsible borrower.

  1. Debt Servicing Ratio/Existing Liabilities  

Banks will also look at the total amount of your debts and liabilities to evaluate your loan application and creditworthiness. Thus, your loan application will have a lower approval rate the more you owe.

It’s useless to conceal your outstanding bank debts as a representative can readily identify them through a credit check.

If you’re considering taking a loan, consider increasing your debt servicing ratio (also known as your debt-to-income ratio) first. This constitutes one of the primary causes of loan rejections.

Here’s how to figure it out: (Total Monthly Obligations/Total Monthly Income) x %

  1. Value of Property

The bank will investigate the home’s current market value for an Equity Refinance. This gives them a sense of whether or not the amount you want is fair. This also applies mainly to subscale properties (second-hand homes).

You may assume that the bank would gladly lend you RM1.4 million (because they would profit from the interest regardless), but that is not the case. A bank agent would genuinely research the property’s actual market value, so there is a good likelihood that you would get only part of the amount you requested. You’ll have to pay the rest of the bill on your own.

  1. Age and Length of the Loan Repayment Period

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You can expect a 5-year loan term if you want to renovate your current house. Therefore, obtaining approval might be challenging if you apply for your loan at age 60. Borrowers between the ages of 30 and 50 are typically favoured since they are regarded as financially solid and have many years left in the workforce.

Comparing Personal Loan Rates for Home Renovation

If you need money for a personal or professional endeavour like home renovation, shopping around and comparing different loan options is best. Devote sufficient time to loan browsing and comparing interest rates. If you do this, you’ll have a better chance of qualifying for favourable financing terms.

The best time to look around for a loan is between 14 and 45 days out. During this time, called the “loan shopping window,” you can ask about loans without repeated inquiries being tracked and hurting your credit score.

The advantages of shopping around for a personal loan for home improvement in Malaysia are numerous, some of which are:

  • You will get a clearer picture of the current interest rates for loans.
  • You can include the related costs in your calculation.
  • You’ll almost certainly get a better deal.
  • You can look into several lending choices.

The following is the table showing the top renovation loans for Malaysians.

Bank  Loan(RM)  Min. Monthly Income(RM)  Interest Rate(p.a.)  Borrowing Period(yrs) 
Bank Islam  10,000 – 300,000  4,000  4.50% – 7.50%  1 – 10  
HSBC Amanah  6,000 – 250,000  3,000  4.88% – 10.50%  2 – 7 
Alliance Bank  5,000 – 200,000  3,000  4.99% – 15.28%  1 – 7 
Al Rajhi Bank  5,000 – 250,000  5,000  5.99% – 11.88%  1 – 8 
BSN  5,000 – 400,000  3,000  6.00% – 8.50%  2 – 10 
MBSB Bank  50,000 – 300,000  5,000  6.29% – 11.90%  3 – 10 
Maybank  5,000 – 100,000  3,500  6.50% – 8.00%  2 – 6 
CIMB  2,000 – 100,000  2,000  6.88% – 14.88%  2 – 5 
Standard Chartered  3,000 – 200,000  3,000  7.50%  1 – 5 
Bank Rakyat  5,000 – 400,000  2,000  7.66% – 10.22%  1 – 10  
AEON Credit Service  1,000 – 100,000  1,500  7.92% – 18.00%  0.5 – 7  
AmBank  2,000 – 150,000  3,000  8.00% – 11.99%  1 – 5 
RHB  2,000 – 150,00  1,500  8.59% – 13.76%  1 – 7 
KFH  5,000 – 150,000  3,000  8.88%  2 – 8 
Hong Leong Islamic Bank  5,000 – 150,000  2,000  9.00% – 12.50%  2 – 5 
UOB  5,000 – 100,000  3,000  9.99% – 11.99%  1 – 5 
Evo Credit  5,000 – 400,000  3,500  12.00% – 18.00%  2 mnths – 5  
instaDuit  1,000 – 10,000  1,500  18.00%  1 – 4 
JCL  1,000 – 50,000  1,000  18.00% – 20.00%  0.5 – 5 



Which Banks Offer the Best Renovation Loans?

Due to their straightforward online application processes, favourable interest rates, affordable monthly payments, and other fantastic loan options they provide to local customers, RHB, Alliance Bank, and Al Rajhi Bank are some of the banks in Malaysia that are best for renovation loans.

Applying for a Personal Loan for Home Renovation

Standard Documents Required For a Personal Loan Application

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To expedite the application process for your loan, you should get the necessary paperwork ready ahead of time, including your identification card and evidence of income.

Additionally, the documents required to acquire a personal loan vary between financial institutions and types of employment.

Therefore, it is essential to check with your preferred bank in advance. However, the majority of banks often want the following documents:

For unsecured personal loan-

  • NRIC,
  • 3-6 months’ payslip,
  • EPF statement
  • 6 months bank statement

For equity finance- the documents mentioned above + your property detail

The Loan Approval Process

You can apply for a personal loan offline by visiting your preferred bank’s branch and interacting with a loan officer.

The bank might provide you with the money in many ways once you get authorised for a loan. To receive the cheque or IBG Transfer, certain financial institutions insist that you open a savings account with them.

Remember that establishing whether your loan application is approved will mostly depend on your eligibility, credit history, and credit score.

Am I Eligible for a Personal Loan Application?

Before you can apply for a personal loan, you need to satisfy the criteria specified by the bank.

These criteria may include, but are not limited to:

  • Nationality: Malaysian, foreigner, or permanent resident
  • Age: between 21 and 60
  • Salary employee (government or private sector) or self-employed
  • Types of income: Commission based, fixed, and contract
  • Residence: owned, rented, shared with family or other relatives, provided by your employer, etc.

Pro Tip: Your way of living determines whether or not you get a loan. You might not be a good borrower if the bank notices discrepancies in your employment history, pay and discretionary incomes, and dwelling places.

What Exactly is a Credit Score?

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A credit score is a three-digit number that assesses consumers’ creditworthiness via their credit history or records.

A higher credit score means a greater likelihood of loan acceptance, lower interest rates, and a quicker approval process.

The bank is more likely to approve a loan application with a good credit score. In contrast, a poor credit score increases the likelihood that the bank will either deny your application or approve it with conditions.

When you have more than one line of credit, monitoring your score regularly is smart. You can do this through CTOS, a private credit bureau that compiles information from public records and which financial institutions consult before granting a consumer loan.

What Impact Will a Personal Loan Have on Your Credit Score?

If you want to avoid getting penalised by the bank, you should prioritise completing the entire payment of your instalment before or on the day it is due. Not only that, but you can also expect a decline in your credit rating as a result.

The non-banks daily interest rate is typically approximately 8%, whereas banks charge a flat 1%. In other words, you need to strategically manage your loans to avoid your credit score taking a hit.

Managing Your Personal Loan

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Monthly Repayment Obligation

After receiving your loan approval, the monthly repayment is the most crucial step to take.

Failure to clear off the debt payments can have serious consequences when applying for new credit, especially mortgages.

When is the due date for the monthly payment on my renovation loan?

The first instalment payment on your loan will be due one month after the funds appear in your bank account following approval.

According to the terms and conditions, your monthly payment must be paid on the first or the middle of the month.

If you cannot make a full payment at any point throughout the instalment period, the bank may allow you to make a minimum payment instead.

By doing this, you’ll avoid late fees, but your outstanding balance will be subject to charges of 15%-18% each year.

Can I pay off the rest of my loans early?

Depending on the terms and conditions of your loan, you can pay off any outstanding loan amounts before the entire loan tenure.

Where do I send my instalment payment each month?

For your convenience, banks usually accept the following methods of payment:

  • Digital payment, IBFT or IBG transfers, etc.
  • Standing order (automatic deduction)
  • Over-the-counter/Cash payment

Advice: If you make on-time monthly payments during the term, you may be eligible for a cashback on your interest payments.

Special Considerations for Renovation Loans

Did you end up spending less money on renovations than anticipated? Lenders will likely say “no” if they discover you’ve used loan money for something outside what it was intended.

However, you can save money on interest by making extra payments or paying off your loan early if you have any spare cash. On the hand, make sure you choose a lender who does not impose an early settlement fee if you find yourself in this situation.

What is a Debt Consolidation Loan?

A debt consolidation loan helps you merge several debts into a single payment.

Managing your finances can be challenging when you owe numerous creditors with varying balances, interest rates, payment schedules, and terms.

However, you could pay them off with a debt consolidation loan at less interest and over an extended period, saving you money on monthly payments and increasing your available cash.

How to Negotiate Lower Interest Rates?

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Your interest rate on a mortgage is negotiable. Similar to salary negotiations, if you skip asking for a better deal, you will likely not receive it.

Therefore, how exactly do you ask?

You dial your lender’s number and request a rate reduction. Just like that! If you need help approaching your lender, your broker may handle it.

During the conversation, make it clear that you want a lower interest rate on your home renovation loan in an assertive yet cordial manner. This is the time to begin supporting your request by:

  • Telling the lender why you’re a good customer
  • The rate you pay as a loyal client versus that of new consumers.
  • Bringing up the lower prices that the competition offers, although it’s better to bring this up only after they won’t budge when you discuss new client rates.

Tips for Finding the Best Loan Rates for Personal Loans

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Apply these five guidelines when reviewing loan offers to ensure you get the best one for your needs.

  • Obtain estimates from a minimum of three lenders, ideally more.
  • Find loan providers who only pull your credit after showing you multiple loan options.
  • Always ensure that you are comparing the right loan types.
  • Consider loans with the lowest total costs, such as interest rates and penalties.
  • It is vital to compare the APR rather than just the interest rate while shopping around. The annual percentage rate or APR shows the total interest you’ll pay each year for borrowing money, including any fees.
  • Read between the line of the terms and conditions.

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Given your credit rating, repayment history, and the lender’s interest calculation process, you can negotiate a more favourable interest rate. The total amount you have to pay back will be less if the interest rate is lower.


Ultimately, getting a loan to fix your house is a good idea.

Therefore, preparation is essential when arranging to fund a house renovation. Homeowners have a variety of alternatives to pick from for financing a home improvement project. When researching your loan alternatives, consult several Malaysian lenders to receive the best deals.

Before contracting with any personal loan provider or lender, consider all the variables, including risk, interest rates, repayment schedules, and fees. Doing this ensures the road to renovating your dream house is free of financial setbacks!


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