Home Renovation Loans in South Africa: Personal Loan, Access Bond or Further Loan?
Home improvement is one of the biggest reasons South Africans borrow: Absa reports that it accounts for almost 24% of all personal loans it books. But the loan you choose can make a big difference to what the project really costs. With the prime rate at 10.75%, the gap between an unsecured personal loan and borrowing against your home matters. The table below compares the main options, and you can compare NCR-registered lenders on saloansonline.co.za.
| Option | How It Works | Pros | Watch Out For |
|---|---|---|---|
| Personal loan | An unsecured loan with fixed monthly repayments, usually over 12 to 72 months | Quick access and a simple application, with no collateral needed | One financial adviser describes it as the most expensive credit option. It suits small renovations best. |
| Access bond or re-advance | You re-borrow capital you have already paid into your home loan | Faster access at competitive rates, and an access bond needs no new registration | Interest over a long bond term can cost more than a short personal loan, so repay it as soon as you can |
| Further loan or additional bond | You borrow against the increased value of your property | Better suited to bigger projects such as an extra room or structural changes, at lower rates | Upfront fees are usually higher, and you may increase your total debt and repayment term |
| New bond on a bond-free property | If you own a property outright, you can raise a bond on it | Home-loan rates rather than unsecured rates | Your home becomes security for the loan |
Tips before you borrow
- Consider the resale value of your home, since shoddy work can lower it.
- If you have a home loan, ask about your access facility first, and consider paying slightly more than your instalment to build up available funds.
- Speak to your bank or a financial adviser so the choice suits both your renovation and your long-term finances.
Rates and fees vary between lenders, so compare the total cost of credit before you decide. This article is for information only and is not financial advice.
Sources
- Should you take out a personal loan for home renovations? (JustMoney)
- Choose the best loan for your home renovation (Sunday World)
- New financing solutions for home builders and renovators (Business Report)
- How to fund a home renovation (Private Property)
- Access bonds the best way to finance upgrades and renovations (Citizen)
- Existing home loan options (Standard Bank)