The right way to finance a renovation depends on the project size, your repayment timeline and how much flexibility you need.
A personal loan may suit a larger, one-off renovation with a known total cost because you borrow a set amount and repay it over a fixed term. A credit card may suit smaller or staged expenses, especially if you can clear a 0% purchase offer before the promotional period ends. Econnex lets you compare personal loans and credit cards from a panel of participating providers, but not all products in the market are compared.
Whether you are replacing a kitchen, updating a bathroom or refreshing your outdoor space, renovation costs can build quickly. This guide explains how personal loans and credit cards work for renovation spending, what costs to check and how to match the option to your project.
How does a personal loan work for a home renovation?
A personal loan gives you a set lump sum, which you repay with interest over an agreed term. ASIC MoneySmart says personal loans are usually repaid over one to seven years, and the comparison rate can help you understand the true cost of a loan because it includes interest plus certain fees and charges.
Personal loans can be secured or unsecured.
An unsecured personal loan is a type of loan that doesn’t require collateral, such as a car or property, to secure it. Unlike secured loans where you pledge an asset as security, unsecured personal loans rely on your creditworthiness and financial history for approval.
Lenders assess your income, expenses, credit score, and debt-to-income ratio to determine if you’re eligible for the loan and what interest rate you’ll be charged. Because they pose more risk to lenders given the lack of collateral interest rates for unsecured loans are often higher than for secured loans.
A secured personal loan is backed by an asset, such as a car or another eligible asset accepted by the lender. Secured loans may offer lower rates than unsecured loans for some borrowers, but the asset can be at risk if repayments are not made. This may be relevant for some renovation borrowers, but the suitability depends on the lender’s terms and your circumstances.
For renovations, the main benefit of a personal loan is predictability. You know how much you are borrowing, what the repayments are expected to be and when the loan is due to end.
Is a credit card a good option for renovations?
A credit card gives you revolving credit up to an approved limit. This can be useful for staged purchases, smaller upgrades or unexpected renovation costs, because you can spend as needed rather than borrowing the full amount upfront.
The risk is interest. ASIC MoneySmart says the average credit card interest rate is over 18%, and carrying a balance can become expensive if it is not repaid quickly.
A 0% purchase card or balance transfer card may reduce interest costs if used carefully. These cards usually offer an interest-free window for eligible purchases or transferred balances. If the balance is fully repaid before the promotional period ends, you may avoid interest on that balance. If any amount remains after the promotional period, the standard revert rate applies.
Credit cards can also include annual fees, balance transfer fees, cash advance fees or rewards program fees. These costs should be included when comparing a card against a personal loan.
Personal loan vs credit card for renovations
| Feature | Personal loan | Credit card |
| Better suited to | Larger, one-off renovation with a known cost | Smaller, staged or uncertain renovation costs |
| Typical amount | Often from a few thousand dollars up to higher loan limits, depending on lender and assessment | Up to your approved credit limit |
| Interest rate | Varies by lender, product and borrower profile | Can be high on carried balances |
| Repayment structure | Fixed repayments over a set term | Flexible minimum repayments, which can slow repayment |
| Flexibility | Lower, because the amount is borrowed upfront | Higher, because you can spend as needed |
| Interest-free option | Not typically | Possible through 0% purchase or balance transfer offers |
| Main cost to check | Comparison rate, establishment fee, monthly fee, early repayment or break fees | Revert rate, annual fee, balance transfer fee, late payment fee and cash advance rules |
| Main risk | Borrowing more than needed or locking into fees | Carrying the balance beyond the promo period |
Which is cheaper: a personal loan or credit card for renovations?
The cheaper option depends on your rate, fees and how quickly you repay the debt.
Large, one-off renovation
For a full kitchen renovation, bathroom rebuild or roof replacement, a personal loan may be easier to manage because the cost is known upfront and repayments are structured.
Smaller or staged renovation
For cosmetic updates, DIY supplies or smaller staged purchases, a credit card may provide more flexibility. A 0% purchase offer could reduce interest costs if you can fully repay the balance before the promotional period ends.
Mixed renovation
Some homeowners may use a personal loan for the larger fixed portion and a credit card for smaller incidentals they plan to clear each month. This can work only if both debts are carefully managed.
Example: $25,000 renovation cost comparison
Suppose you need to finance a $25,000 renovation. The total cost will depend on the product, interest rate, fees, repayment behaviour and provider assessment.
As an illustration, a $25,000 personal loan at 12% p.a. over five years may result in total repayments of approximately $33,000 to $34,000, including around $8,000 to $9,000 in interest, before considering any applicable fees or charges.
If the same $25,000 balance were carried on a standard credit card at 20% p.a. over five years, the total amount repaid may be closer to $39,000 to $40,000, including roughly $14,000 to $15,000 in interest, depending on repayment amounts, fees, card terms and whether interest applies to the full carried balance.
A 0% purchase card may reduce interest costs if the full eligible balance is repaid within the promotional period. For example, clearing $25,000 over 24 months would require repayments of about $1,042 per month, excluding any card fees or other charges. Interest may apply if the balance is not repaid in full before the promotional period ends, if payments are missed, or if the transaction is not eligible for the promotional offer.
This example is illustrative only and is not a quote or product recommendation. It excludes fees, charges and changes to rates unless stated. Actual rates, repayments, fees, credit limits and approval depend on the provider’s criteria, credit assessment and product terms. Before applying, read the relevant Target Market Determination (TMD), loan terms, credit card conditions, fees, eligibility criteria and product documentation.
What should you check before borrowing?
Compare the comparison rate
Do not look only at the headline interest rate. ASIC MoneySmart says the comparison rate can help you work out the true cost of a loan because it includes the interest rate plus certain fees and charges.
Check the repayment amount
A lower rate over a longer loan term may still cost more in total interest. Use a repayment calculator and check whether the repayment fits your budget.
Check credit card annual fees
If you are considering a 0% purchase or balance transfer card, check the annual fee. A card with no interest for a period may still cost money if annual fees or other charges apply.
Be careful with credit card limits
If you use a personal loan to pay down a credit card balance, consider how the remaining card limit fits with your budget and borrowing plans. Keeping a high unused limit may affect future borrowing assessments, and using the card again could leave you managing two debts.
Consider debt consolidation if renovation costs are already on a card
If renovation spending is already sitting on a credit card at a high interest rate, a debt consolidation personal loan may be one option to compare. This does not remove the debt, but it may provide a structured repayment term and a different rate. Check fees, comparison rates and whether consolidating genuinely reduces your total cost.
Borrow only what you need
A firm renovation quote before you apply can help reduce the risk of over-borrowing or needing expensive top-ups later.
Smart tip: Get an itemised quote from your tradesperson or builder before applying for finance. Knowing the likely total cost can help you compare the right borrowing amount and repayment structure.
What other ways can you fund a renovation?
A personal loan and credit card are not the only options.
If you have a mortgage, redraw or refinancing may provide access to home equity at a lower rate than many personal loans or credit cards. However, the amount is added to your home loan and is secured against your property, so the risk profile is different.
Interest-free retailer finance or buy now, pay later may suit smaller purchases, but you should read the terms carefully and consider whether repayments are manageable.
If the renovation is for an investment property, tax treatment may differ from a renovation on your home. Speak to a registered tax agent or licensed financial adviser for guidance based on your circumstances.
What about green renovations?
If your renovation includes solar panels, a battery system or energy-efficient upgrades, some lenders may offer green personal loans with different rates or terms.
The Australian Government’s Cheaper Home Batteries Program provides a discount on the cost of installing eligible small-scale battery systems, not general renovation costs. Energy.gov.au says the program began on 1 July 2025 and provides around a 30% discount on eligible small-scale battery systems connected to new or existing rooftop solar.
The program was also updated from 1 May 2026, so check current program details before factoring any battery discount into your borrowing amount.
How to compare your options
Work out your project’s total cost, your preferred repayment structure and how quickly you can realistically repay.
Then compare:
- Personal loans: Review comparison rates, loan terms, fees, repayment flexibility and secured versus unsecured options.
- Credit cards: Review 0% purchase periods, balance transfer terms, revert rates, annual fees and repayment requirements.
- Green finance: If your renovation includes eligible energy upgrades, check whether a green loan or battery discount may apply.
Disclaimer: The content provided is for informational purposes only and is based on publicly available information. While efforts are made to ensure accuracy, readers should verify all details with personal loan providers or distributors. Before applying for a personal loan or credit card, consider whether the product is appropriate for your circumstances, whether repayments are affordable, and read the relevant Target Market Determination, loan terms, fees, eligibility criteria and product documentation. Econnex Comparison may earn a commission from selected providers when users switch plans via its platform. Not all plans or providers may be included in the comparison, and availability can vary. This blog does not constitute professional advice and should not be the sole basis for financial decisions.