Yes, tax loan season has come again. To get your attention, banks use gimmicks like low interest rate and attractive cash rebates. But how do you know which one is the best?
Compare Tax Loan Promotions 2019
- Dah Sing: Up to HK$888 cash rebate for setting up an account
- HSBC: Apply online and submit the supporting documents to get up to HK$200 cash rebate
- ICBC: Lower interest rate for selected customers
- Citibank: Free tablet for Citi private clients, Citigold clients, and Citi ULTIMA Card holders
- BEA: HK$4,800 cash rebate for new customers
- Fubon: Lower interest rate for selected customers
- Bank of China: Up to HK$400 cash rebate for online applicants & up to HK$500 cash rebate for referrals
- DBS: Up to HK$2,000 cash coupon
- Hang Seng: Up to HK$500 cash rebate for online applicants
- Standard Chartered: HK$200 cash coupon for online application
- HSBC: Lowest APR for tax loans >HK$200,000
- CITIC: A lower interest rate for selected customers
Out of all the banks, Dah Sing offers the lowest Annual Percentage Rate (APR) but that comes with a price — you can only get the deal if you open 360° Easy Payroll Services at Dah Sing. But note that the loan amount of Dah Sing is relatively low and its repayment period is up to 12 months only. If you’re looking for a big loan or a longer repayment period, you’ll need to consider other tax loan plans.
As for other banks, you can enjoy the lowest APR once your loan amount reaches HK$1,000,000 to HK$1,500,000 with a repayment period of 6 to 12 months.
Dah Sing Tax Loan: Offers the Lowest APR
Let’s do some math to find out the best deals. Say for example that you’re going to get an HK$100,000 12-month tax loan.
As illustrated in the chart below, Dah Sing offers the lowest APR. By going with that loan, you need to repay HK$8,453/month. Fubon has the highest APR, which means that you need to repay HK$8,624/month. In short, Fubon is HK$171 more expensive than Dah Sing.
Wondering why Citibank, CITIC and HSBC aren’t in the below chart? This is because for HK$100,000 tax loans, the larger banks typically do not announce their offers unless you call them to find out.
Tip #1 of Getting a Smaller Loan Repayment
Dah Sing, ICBC and Fubon offer a lower APR to customers who are civil servants or professionals like accountants, lawyers, doctors, and actuaries. You can actually save thousands of dollars on your monthly repayment!
Tip #2 of Getting a Smaller Loan Repayment
Many banks offer cash rebates to their customers, which is a way to reduce your interest expenses. Generally, the more loans you’re getting, the more cash rebates you can get.
Getting a cheap loan is indeed tempting, but you should understand more about tax loans before borrowing.
Tax Loans: More than Tax Payments
Back in the days, some banks would pay your tax bill directly on behalf of you. But now? Tax loans are just another personal loan product, which can be used however you want. You can use the tax loan to pay for your renovations, weddings, further studies or simply to improve your cash flow.
Repayment Period & Maximum Loan Amount
Usually, tax loans offer a shorter repayment period, which is less than 24 months, compared to regular personal loans. But at the same time, they lend you a loan amount that is almost as good as personal loans, which can be 10x of your monthly salary. The amount is not limited by your tax payable.
With that said, tax loans give you much higher loan amounts but with a shorter repayment period. Cheap loans are not cost-free, however, you still have to deal interest. If you want to lower the cost of borrowing, you can choose the plans that offer two-phase withdrawal so that you can take out cash when needed.
APR: The Key to Compare
Banks use different ways to package their tax loans. To actually compare the total cost you need to pay, you’d have to spend time and effort.
To avoid the hassle, you can simply compare the actual expenses of loans by their annual percentage rate (APR). APR calculates all related interests, administration fees and service charge. One thing to note though – the APR excludes overdue repayment and the service charge of early repayment. But if you remember to pay on-time, you can save thousands of money.
Be aware of the terms and conditions
Some tax loan plans seem to be very attractive because of an extremely low interest rate. But… there is no such thing as a free lunch. These promotions usually come with credit conditions.
For example, applicants must be privileged customers of the bank, which means you have to set up an account and deposit a certain amount of money, or else they specify a minimum loan limit like HK$1,000,000 in order for you to enjoy a lower rate discount.
The banks now mostly take 8 to 12 times of individual’s monthly income as the maximum credit limit, so if your salary is less than HK$84,000, you may never enjoy the lower-rate discount.
To borrow or not to borrow? Borrow only if you can repay!