Debt can be good or bad, and anyone should know the difference before seeking any credit. However, experts in interior design and renovation in Singapore will attest that some debts can be either. A renovation loan is one of them. So what makes a renovation loan good debt?
Pick the Right Place to Renovate
Every adult who is old enough knows that renovation is the bane of home ownership. There are times, however, when home projects do add a ton of value to the property, which can become a big deal at resale.
If you are going to borrow money to renovate your place of residence, it pays to focus on the areas that can surely increase its price on paper. The two best candidates are the kitchen and the bathroom. These spaces have to be in good shape structurally and aesthetically, for they are communal.
Furthermore, the flooring deserves a special mention. It is visual-heavy regardless of the room, so it must be in superb condition at all times.
Borrow Only What You Can Repay
When it comes to the loan amount, it is imperative to avoid over-borrowing. A debt of this size can build your credit steadily as long as it is manageable. Otherwise, it can bury you in a deep financial hole that might take you years to get out of.
Most lenders will exercise due diligence and will not loan you money your credit score can’t justify repaying. But you should take the necessary precautions yourself. Apart from knowing where your credit stands before your renovation loan application, you should take a realistic assessment of your repayment capacity. If you bite more than you can chew, your loan will likely cause more harm than good to your life.
Pay Off Your Other Debts
Even if you find a legal lender willing to loan you adequate funds for your renovation project despite being heavily indebted, take the initiative to resolve your current financial obligations first. Taking out a renovation loan when you are already struggling to pay your other debts will probably make your financial situation more difficult than before.
Do Not Apply Immediately After Getting Rejected
A renovation loan can already hurt your credit without being granted of it. Applying for it triggers a hard inquiry, which can knock points off your credit score. Nevertheless, it is practically harmless as long as it does not appear in your file too often over a short period.
If your renovation loan request gets denied the first time, do not make another attempt right away. Instead, repair your credit first before talking to a lender again. This way, your chances of approval are higher, and you will keep your inquiries to a minimum.
A renovation loan might not be considered good debt even if you play your cards right, but it can’t be categorized as totally bad, either. You ought to maximize the effects of its positives and reduce the potential implications of its negatives to manage that risks that come with it.
