The mortgage and the construction loan are generally the preferred solutions for owners wishing to carry out repair work. However, when the work remains limited in cost, the renovation loan can be an attractive alternative. What is it, and what are the steps to take? Our explanations.
For limited amounts in cost
The renovation loan is presented as a consumer loan, the amount of which you freely use to finance the work related to your property. As such, it obeys the same rules as private credit. The request can be made both with a credit bank and with a credit agency such as CreditFlex, which offers home improvement loan solutions. Compared to a construction loan for example, this type of loan remains limited in terms of amount: if the theoretical limit is 250,000 USD, most private loans concern amounts less than 50,000 USD.
If the amounts are more limited than through mortgage solutions, the home improvement loan has a number of advantages which can make it an attractive alternative:
- Faster and simplified procedures : only a few documents are sufficient to make a request. The decision is in principle very quick (from 2-3 days once the documents have been provided) and leads to the signing of a contract.
- Free use of the amount obtained : the money obtained can also be freely used according to your needs. No justification is required.
- Flexible terms : the amount is between 3,000 and 250,000 USD, with a reimbursement period of up to 72 months (sometimes more depending on the establishment). In addition, a home improvement loan can also be repaid early, reducing the interest paid.
- Tax deductions : the interest on the credit can be tax deducted.
- No link with the mortgage : it is not necessary to contact the establishment with which you contracted your mortgage.
The total cost of a home improvement loan will essentially depend on three factors : the amount borrowed, the interest rate charged, and the expected repayment duration. For example, a loan of 10,000 USD over 12 months, with a rate of 7.9% represents a total interest payable of 417 USD. With a monthly payment of around 868 USD, you repay a total of 10’417 USD. By doubling the duration of the loan (over 24 months), the interest will double to reach 834 USD. This product is therefore all the more advantageous when purchased for a relatively short period.
The steps to obtain a home improvement loan are exactly the same as for any private loan. The applicant applies to a bank or a credit agency and must be able to provide at least:
- A copy of his ID / residence permit
- A copy of his last three pay slips
- A copy of his basic health insurance premium (or copy of invoice)
Depending on the applicant’s situation, other documents may be required. Acceptance conditions depend on the situation and the budget.
If it is still possible to apply directly to a bank, going through a specialized agency like Best Bank will allow you to benefit from additional advice, and above all to be oriented towards the most advantageous solutions. In all cases, each request being registered with a single Swiss central (ZEK), it is advisable to avoid making too many requests at the same time in order to avoid being blocked for several months.