Is A Tax Loan The Best Solution For Credit Card Debts?

Is A Tax Loan The Best Solution For Credit Card Debts?

Tax loans provide an opportunity to borrow money at attractive interest rates compared to personal loans during the tax season (from Oct to Apr), making them an enticing option for individuals seeking to address their credit card debts. Alternatively, individuals may also be considering debt consolidation plans or credit installments.

But which is the better option? When deciding between these options, it is crucial to consider factors such as interest rates, handling fees, and repayment periods / tenor. By carefully evaluating these aspects, individuals can determine the most suitable method for effectively clearing their credit card debts.

At MoneySmart, we specialise in comparing and analysing various financial products to help individuals make informed decisions and improve their financial well-being. This includes information on tax loans and credit card debts for those who want to learn more.

Tax loan products: exclusive offer overview

As the tax season approaches, various banks are unveiling their enticing low-interest tax loan options. But hey, it’s not just about the attractive interest rates they’re flaunting. Don’t forget to grab hold of the welcome offers that come along with these tax loans, soaring as high as HK$18,199. Here are some of the tax loan products with exclusive offers:

Citi Personal Loan (For Tax Season)

Citi Personal Loan (For Tax Season) offers a low-interest rate of 1.78% for large loan sizes up to HK$3,500,000. The loan allows drawdowns with a maximum 60-month repayment period, making it perfect for individuals in need of a loan to boost their cash flow.

Plus, MoneySmart is now offering an exclusive welcome offer of up to HK$18,199, which significantly reduces the borrowing cost.

BOC Express Cash Instalment Loan – Tax Season Loan

Bank of China logo

Monthly Payment

HK$13,131

Monthly Payment
APR as low as 1.78%*
APR*
1.78%
Total Amount Payable
HK$315,148.80
Total Interest Payable
HK$15,148.80
Monthly Payment
HK$13,131

BOC Express Cash Instalment Loan offers loans up to HK$4,000,000 with a repayment period ranging from 6 to 60 months. If you are a BOC banking customer, you can apply for a loan instantly through the mobile app or online banking.

WeLend Personal Loan (Available for tax season)

WeLend offers highly flexible repayment periods ranging from 3 to 84 months, allowing borrowers to choose a timeframe that suits their financial situation. With the ability to access personal loans up to HK$1,500,000, individuals have the freedom to utilise the funds for various needs. What’s more? For loans smaller than HK$150,000, WeLend does not require income proof or address proof, making the application process more convenient for borrowers.

This flexibility and streamlined approach make WeLend an attractive option for individuals seeking personal loans with tailored repayment options.

AEON Too Easy Tax Loan

Why doesn’t paying only the minimum on your credit card debt work?

Are you paying just the minimum on your credit card debt? Well, that’s a recipe for financial disaster, my friend. Let me break it down for you:

Interest that piles up

Credit cards love to slap you with high interest rates, ranging from 15% to a mind-boggling 35% or more. When you make only the minimum payment, you’re basically inviting those interest charges to party on your remaining balance. And trust me, they’ll party hard and won’t end the party soon. Over time, these charges can pile up like a relentless hangover, making it a real pain to pay off your debt.

Credit score blues

Your credit score ain’t gonna be happy if all you do is pay the minimum. Credit utilisation, which measures how much of your credit limit you’re using, plays a big role in determining your score. And when you’re carrying a hefty balance relative to your limit, it’s like wearing a scarlet letter on your financial reputation. It can lower your credit score and make it harder for you to get credit in the future. (Ouch!)

Break free from the circle with tax loans

Break free from the cycle of credit card debt by paying more than the minimum whenever possible. Take control of your finances by repaying the principal balance faster, minimising interest charges, and ultimately eliminating the debt.

Tax loans can help in this sense. With a low-interest-rate tax loan, you’re able to repay your credit debts at once and break free from high-interest debts. But remember, everyone’s financial situation is unique, so it’s important to consider your own circumstances with a financial advisor or credit counselling service to create a personalised debt repayment plan.

How do tax loans help with credit card debt?

Much like a knight’s sword, a tax loan is a tool that requires careful consideration and selection. Individuals must evaluate various tax loan options, comparing interest rates, handling fees, and repayment periods, to find the perfect fit for their needs. (Find out more about how to choose the best tax loans.) Here is how a tax loan can help with credit debts.

Tax loan is no longer paying tax only

Years ago, tax loans were as boring as paying taxes itself. But hold on to your calculators, because tax loans have changed. They (mostly referred to as “tax season loans” now, but people still call them “tax loans”) have broken free from the rules of tax payments and now boast a world of possibilities! Need to spruce up your humble abode? Want to jet off to exotic lands? Planning the wedding of the century? And yes, you guessed it, you can even use them to pay those pesky credit card debts. 

So why not make use of the low-interest rate tax loan to give yourself an extra boost of cash flow?

Tax loan has a lower interest rate than a credit card installment

In general, a tax loan typically has a lower interest rate compared to a credit card installment. Here is a general comparison for a HK$100,000 loan with a 12-month repayment period from Citi Personal Loan (For Tax Season), HSBC Credit Card Instalment Plan, and a virtual bank loan – MOX bank instant loan.

Case Study of HK$100,000 loan with 12-month repayment period
Loan Amount HK$100,000
Loan Period 12 months
Loan Product Interest Rate (APR) Monthly Repayment
Citi Personal Loan (For Tax Season) 1.78% HK$8,481.7
HSBC Credit Card Instalment Plan 4.04% HK$8,670
MOX Instant Loan 4.53% HK$8,710

(The information provided above serves as an example using the lower APR. Please note that interest rates may vary based on the applicant’s situation. For more detailed information, we recommend referring to the respective banks.)

Using low-interest tax loans to refinance

If you have loans with high interest rates, you may want to consider applying for tax loans instead. Tax loans typically have lower interest rates compared to regular personal loans, which can help lower your overall repayment amounts.

By opting for low-interest tax loans, you can efficiently repay your debts and maintain a positive personal credit rating. This can be advantageous when searching for employment, applying for mortgages, and pursuing other financial goals.

For individuals who are only making minimum payments on their credit cards, which typically carry an annual interest rate of up to 35%, it becomes increasingly difficult to fully pay off their debts in one lump sum. As a consequence, their debts continue to accumulate, leading to a never-ending cycle of financial burden.

It is crucial for these individuals to explore alternative strategies to address their credit card debts effectively and break free from this cycle of accumulating interest. So, applying for a low-interest-rate tax loan can be an option.

If a large loan amount is needed, opt for debt consolidation loan

A debt consolidation loan is an alternative for repaying your credit card debt. If you require a larger loan amount that cannot be covered by tax loans and need a longer repayment period, then a debt consolidation plan would be more suitable. 

With a debt consolidation loan, you can borrow up to 21 times your monthly salary, and the repayment period can extend up to 72 months, allowing you to spread out the monthly repayment amount.

However, it is important to note that debt consolidation loans are used to directly repay your outstanding loans, and no extra cash goes to you. This can limit the flexibility of improving your cash flow. In short, debt consolidation loans are best suited for individuals who have a significant amount of debt and require a longer repayment period

Tax Loan And Debt Consolidation Loan Comparison
Comparison Tax Loan Debt Consolidation Loan
Loan Size Smaller (up to 18 times of monthly salary) Larger (up to 21 times of monthly salary)
Interest Rate Lower Higher
Repayment Period Shorter (up to 60 months) Longer (up to 72 months)
Cash Flow Flexibility No restrictions on usage Directly used to repay your debts.

WeLab Bank Card Debt Consolidation Loan

WeLab offers a maximum loan size of HK$1,500,000 and 18 times of your monthly salary with a low interest rate of 1.78% and a 72-month repayment period. 

WeLab Bank logo

Monthly Payment

HK$13,040

Monthly Payment
MoneySmart Exclusive
APR*
4.11%
Total Amount Payable
HK$312,960
Total Interest Payable
HK$12,960
Monthly Payment
HK$13,040
MoneySmart Exclusive:

[May Loan Promotion - Real Cash!]
From now on till 31 May 2024, successfully draw down the loan using MoneySmart unique code "NLSMRT" could enjoy up to HK$13,888 cash rebate offered by WeLab Bank and MoneySmart exclusive rewards up to 80,000 SmartPoints, you can customise your PERFECT REWARDS worth of HK$8,000 with 20+ brand vouchers and products (Brands include but not limit to Apple, Klook, YATA etc) 80,000 SmartPoints can be converted into over HK$5,300 cash and credited to your FPS account directly! (T&C apply)



Exclusive Interest saving guarantee! Clear your card debts and save HKD 50,000 interest expenses, or get HKD 50,000 cash! Also enjoy up to HK$21,888 rewards!

*Upon your submission of the gift redemption form, you acknowledge and agree the information entered in this form may be shared to business partners for validation and that business partners may share their results back to us for fulfilment purposes in accordance with our privacy policy.

Valid until 31 May 2024

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