Does a Low TU Credit Score Affect Applying for a Tax Loan?

Does a Low TU Credit Score Affect Applying for a Tax Loan?

Entering October means that all my working friends will receive tax notices. I bet some of you may consider borrowing tax loans, hoping to relieve tax pressure on one hand and use low-interest loans for other purposes on the other (no jokes, you can use it for flat renovation!). 

In fact, before approving tax loans, major lending institutions generally check the credit rating (simply known as the TransUnion rating, or TU rating) of the borrower. If the borrower’s credit rating is poor, the interest rate will be higher, and the application may even be rejected. Therefore, maintaining a good credit rating is particularly important.

In the following, we’ll be going through the things you’ll need to know about TU and a tax loan. So, you can equip yourself with sufficient knowledge and the tax loan you need with ease.

Does applying for tax loans affect TU credit score?

A good credit rating is undoubtedly the key to borrowing. The higher the borrower’s credit rating, the lower the loan interest rate that can be obtained. On the contrary, if the borrower’s credit rating is lower, the approved interest rate will be higher, and the application may even be rejected. (Note that you can also consider applying for a tax loan without TU, but the interest rate will be relatively higher.) 

According to the data from TransUnion, the median bank loan interest rates approved for borrowers with different credit ratings are different. And the rate difference can be as high as 4 – 5 times higher than the lowest. Herareis the reference details:

Loan interest rates and the TU credit score’s relationship

TU Credit Rating Reference Median Bank Loan Interest Rate
A level 4.7%
B level 5.3%
C level 6.8%
D level 8%
E level 9.4%
F level 10.8%
G level 13.8%
H level 15%
I level 18.4%

Comparison of tax loans for low TU credit ratings

Tax loan Actual Annual Interest Rate Maximum Loan Amount Application Requirements Repayment Period Loan Features
UA Seasonal Tax Loan As low as 1.38% 3 times the tax payable Hong Kong residents aged 18 or above 6 – 36 months HKID Card and Tax Demand Note required only
Citi Speedy Cash Loan As low as 1.78% HK$3,500,000 / 12 times your monthly salary Hong Kong residents aged 18 or above 6 – 60 months Up to HK$8,000 in welcome offers are available

If you’re looking for a tax loan, here are some options available:

UA Seasonal Tax Loan

UA Seasonal Tax Loan is a low-interest option available to Hong Kong residents aged 18 or above, providing an actual annual interest rate as low as 1.38%. You can borrow up to 3 times the amount of tax payable. However, be aware that there is an early settlement fee equivalent to 4% of the outstanding principal amount. 

UA Finance logo

Monthly Payment

HK$12,680

Monthly Payment
Loan amount up to 300% of tax payable
APR*
1.38%
Total Amount Payable
HK$304,320
Total Interest Payable
HK$4,320
Monthly Payment
HK$12,680

Citi Speedy Cash Loan

Looking for a low-interest tax loan in Hong Kong? Citi Speedy Cash Loan offers an annual interest rate as low as 1.78%, with a maximum loan amount of HK$3,500,000, or 12 times your monthly salary. This loan is available to Hong Kong residents aged 18 or older and comes with a welcome offer of up to HK$8,000.

Here is more information about the annualised interest rate of Citi Speedy Cash Loan:

Loan Tenor 6-month 12-month 24-month
APR (or range of APR) 5.9%-33.76% 6.34%-35.7% 6.52%-35.4%

Tax loan application tips

If you are applying for a tax loan, here are some tips that could save you money.

Borrow a tax loan without TU

A poor credit rating is not a dead end. You can also consider borrowing tax loans without TU. However, the interest rate will be relatively higher and the loan amount will be lower. As mentioned above, the median bank loan interest rates for credit ratings A and I can differ up to 4 times, so tax loans without TU are only suitable for people with poor TU. 

Avoid applying for tax loans from multiple financial institutions

In addition, borrowers should avoid applying for tax loans from multiple financial institutions at the same time. If multiple financial institutions check your credit rating at the same time, it may have a negative impact on your credit rating. Therefore, before making an application, compare tax loan products carefully on financial aggregator websites such as MoneySmart.

Consider virtual bank loans

If you have a good TU credit score and want to borrow money quickly, virtual bank tax loans may be a good option. Virtual banks like WeLab Bank offer tax loans with actual annual interest rates even lower than 1.28%. The application process is also more convenient and simple, and it can be done through official websites or mobile applications without the need for documents.

WeLab Bank logo

Monthly Payment

HK$12,740

Monthly Payment
Bank Promo
APR*
1.68%
Total Amount Payable
HK$305,760
Total Interest Payable
HK$5,760
Monthly Payment
HK$12,740

Why should you consider virtual bank tax loans?

Because virtual banks do not have physical branches, they can offer more favourable tax loans under certain conditions. Some virtual bank loans, such as Airstar Bank Personal Loan’s actual annual interest rate, are even lower than 1.58%.

Compared with traditional banks, the application procedures of virtual banks are more convenient and simple. The whole process can be submitted through official websites or mobile applications, and there is no need to show up. It can also be done without a document loan, so it is also suitable for cash-paying freelancers or self-employed people.

In addition, applicants with a good TU rating who want to borrow money quickly should consider borrowing money through virtual banks because many virtual banks use big data to review loan applications, which can achieve instant approval and fast loan disbursement faster than traditional banks!

Traditional bank tax loans vs. virtual bank tax loans vs. financial company tax loans: Which is better for you?

When it comes to getting a tax loan, there are a variety of options to consider.

Traditional banks

Traditional bank tax loans offer the highest loan amounts and lowest interest rates, but the process can be lengthy and require substantial documentation.

Virtual banks

Virtual bank tax loans may offer lower actual annual interest rates than banks and have a more convenient and simple application process, making them suitable for those who cannot provide income proof, have a poor TU rating, or need cash flow urgently.

However, the loan amount of virtual bank tax loans is generally lower than that of banks. Although virtual banks are mainly online-based and do not have physical branches, they also provide customer service through mobile apps or hotlines. Borrowers can inquire about borrowing matters through customer service.

Financial institutions

Many people misunderstand that applying for financial company tax loans will have a negative impact on their TU credit score. In general, financial companies are faster and more convenient in the application and approval of tax loans than banks.

Although the actual annual interest rate of financial company tax loans is relatively high, it may accept applications from those who cannot provide income proof, have a poor TU rating, or need cash flow urgently.

Frequently asked questions: TU and tax loan

If my credit rating is low, will it affect the approval rate and interest rate of my tax loan application?

If your credit rating is poor, the approved interest rate for the loan will generally be higher, and the application may even be rejected.

Is it easier to get a tax loan from a virtual bank versus a traditional bank or financial company?

Applying for a tax loan from a virtual bank is generally as document-free as applying at a financial company. The whole process, from application to loan disbursement, can be done online, making it easier than borrowing from traditional banks.

Can I take out a tax loan without affecting my TU credit rating?

Applying for a tax loan will not affect your TU credit rating as long as you avoid applying for tax loans from multiple financial institutions at the same time.

How can I check my credit rating?

You can purchase your credit report from TransUnion for a fee of HK$280.

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Wanna stay ahead of the herd? Let’s check out the MoneySmart blog for more financial tips!

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