If you are not sure about how much money you will need and when you need it in the foreseeable future, revolving loans could be a great option for you. They are a lot more flexible and allows you to borrow and pay back funds at any time.
Credit card loans and overdrafts are both considered revolving loans. The loan amount can be withdrawn, repaid and redrawn again in any manner and at anytime until the arrangement expires. Another benefit is that your credit limit is back to normal as long as you repay the amount you borrowed. It is a great option in terms of convenience and flexibility and will also enable you to reduce your interest and principal repayment amount significantly!
The difference between revolving loans and other types of loans is that revolving loans are based on annual interest + handling fees. The formula to calculate the interest payment amount is as follows:
Withdrawn Principal x Annual Interest Rate ÷ 365 Days
So, how can you choose the best resolving loans in Hong Kong?
Let’s pretend that you have a $200,000 limit on your revolving loan and decide to borrow $20,000 for 20 days. MoneySmart picks 5 revolving loan plans from 5 banks and compares the different annual interest rates and transaction handling fee.
Standard Chartered Bank: Low-Interest Rate but be aware of The Transaction Handling Fee at ATMs
SC provides 0% p.a. interest rate for the first 3 months. For your first withdrawal, you can borrow up to 95% of the approved credit limit – you can even do this at an ATM. For the remaining 5% of the approved credit limit, you should withdraw from a bank teller instead of an ATM to waive the handling fee.
On the other hand, DBS can lend at an exclusive annual rate of 2.75% for the first 4 months and also waive the annual handling fee.
For existing customers only, HSBC offers a low annual interest rate at 1.9% and will waive the first annual fee and transaction handling fees.
Bank of East Asia: High-Interest Rate but it is offset by an attractive rebate offer
BEA offers a fixed repayment method for the first 6 months with interest fees waived, then a flexible repayment term thereafter. They currently have a promotion to waive both the first-year annual fee and all transaction handling fees. If you want to consolidate all your revolving loans, you can get a 4-month rebate when you transfer to BEA.
All in all, revolving loans are quite flexible but there is a possibility of a higher interest payment if you take longer to pay back the borrowed amount. Before you take out a loan, make sure you answer this question: To borrow or not to borrow? Borrow only if you can repay!