Home renovations are important not just for improving appearance, but also for maintaining and enhancing durability.
However, in some cases, a significant amount of funding may be required, making it difficult to cover the entire cost with personal funds.
In such situations, a “renovation loan” can be very convenient.
This article will provide a detailed explanation of what a renovation loan is, as well as the advantages and disadvantages of utilizing a renovation loan.
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What is a renovation loan?
A renovation loan is, quite literally, a loan that can be used for home renovations, repairs, or expansions.
As mentioned earlier, renovations can require substantial funds, sometimes amounting to several million yen.
That said, if you give up on renovations simply because of the costs, you risk damaging the exterior and decreasing durability.
By utilizing a renovation loan,
・you may not be able to pay a large amount all at once
・you may not want to pay a large amount all at once
you can proceed with renovations more easily.
If a lack of funds leads to further deterioration of the building, it may be more cost-effective to take out a loan and renovate early rather than incurring high costs later.
Additionally, more people are now utilizing renovation loans by viewing them as manageable monthly repayments for building maintenance.
Are there different types of renovation loans?
There are two types of renovation loans:
・Secured
・Unsecured
Let’s take a closer look at the differences between them.
Secured
With a secured renovation loan, you take out a loan using your home or other property as collateral.
By using your home as collateral, you can enjoy benefits such as:
・lower interest rates
・longer repayment periods
However, the approval process may take a bit longer, so if you want to utilize a secured loan, it’s best to start the process early.
Unsecured
With an unsecured loan, you do not set any collateral for the loan.
Unsecured loans typically have shorter approval times and generally do not require a guarantor, making them easy to obtain.
However, since no collateral is set,
・interest rates may be slightly higher
・repayment periods may be shorter
so caution is necessary.
What are the benefits of a renovation loan?
Next, let’s take a closer look at the benefits of utilizing a renovation loan.
Available without collateral
As previously mentioned, renovation loans can be utilized without collateral.
Some may think,
“Of course, I will repay the full amount, but using my home as collateral is a bit much…”
Even in such cases, you can carry out renovations while alleviating mental burdens by setting up an unsecured loan.
The screening criteria are not that strict
Renovation loans undergo the same screening process as housing loans.
However, the screening criteria are not as strict as those for housing loans, so you should be able to utilize them relatively smoothly.
No need to set a mortgage
When utilizing a housing loan, it is necessary to use the building and land as collateral.
This is called a mortgage, and setting a mortgage incurs several tens of thousands of yen in various costs.
However, with renovation loans, there is no need to set a mortgage, allowing you to reduce the troublesome procedures and the several tens of thousands of yen in costs associated with setting a mortgage.
What are the disadvantages of renovation loans?
Next, let’s take a closer look at the disadvantages of utilizing renovation loans.
Interest rates are slightly higher
The interest rates for housing loans are often set between 0.5% and 2%.
On the other hand, renovation loans typically have interest rates ranging from 2% to 4%, which can be considered higher compared to housing loans.
Some may think, “A few percent doesn’t matter,” but a change of just 1% in the interest rate can significantly affect the repayment amount, so it is essential to make a careful judgment.
Short repayment period
When utilizing an unsecured renovation loan, the repayment period is typically between 5 to 10 years.
The shorter the repayment period, the higher the amount of each repayment will be, so it is important to check the monthly repayment amount before utilizing it.
Relatively low borrowing limit
Renovation loans have a relatively low borrowing limit.
Especially for unsecured loans, the limit is around 500,000 to 5,000,000 yen, so caution is necessary.
Depending on the content of the renovation, borrowing between 500,000 and 5,000,000 yen may suffice, but for larger-scale projects, the total cost can exceed 10,000,000 yen.
When undertaking large-scale renovation work or repairs, it is advisable to plan carefully.
Conclusion
Renovating your home is important not only for maintaining a beautiful exterior but also for preventing deterioration and maintaining durability.
However, depending on the renovation content, the total cost can become quite high, making it difficult to cover entirely with personal funds.
In such cases, renovation loans can be very helpful.
By utilizing renovation loans, you can easily carry out expansion and repair work.
However, there are several disadvantages and points to consider regarding renovation loans, so it is essential to think carefully.
Kakeru Koumuten Co., Ltd. also offers renovation loans!
Our company has a business partnership with Orico Product Finance.
The interest rate fluctuates, but the current rate is approximately 3.3% (as of 2025).
Orico Product Finance offers a renovation loan simulation, so please make use of it!
If you have any questions, feel free to contact Kakeru Koumuten Co., Ltd.!
For exterior renovations, exterior wall painting, and roof renovations, trust Kakeru Koumuten Co., Ltd. in Aoba-ku, Yokohama, Kanagawa Prefecture!
Estimates and inspections are free!
AAA is a young company with an average age in the early 20s, but our technology is second to none.
One of our greatest strengths is that we can do all of our own scaffolding, roofing, and painting work. In this industry, where work is generally divided, we are able to provide a complete set of services, which saves time and effort in management and reduces costs. Above all, if there is any trouble, we will come to you right away!
We can confidently declare this. We are the youngest and most friendly renovator in Kanagawa!
