Factors to consider before applying for a personal loan

Trying to find out the maximum personal loan amount you can borrow? Well, borrow only if you can repay! It's important to find out whether you're capable of repaying the loan. You can list your monthly income and expenses to see if you really need a loan, and if so, how much you need.

Some banks, such as HSBC, provide a monthly repayment calculator to help you work out how much you can afford. It's risky to take out a loan that you don't need or can't afford. Any late payment can result in overdue fees and other penalties, which can also affect your credit rating.

Loan scams are prevalent. Be extra cautious when you come across interest-free loans or those with really high rebate rates. In addition to interest, there may be handling fees, annual fees and other expenses involved. Some loans even come with hidden terms and charges. Interest and all other costs should be taken into account.

The Hong Kong Monetary Authority requires all banks to use the same formula to calculate APR (annualised percentage rate). It's an annual rate that includes interest and any applicable borrowing costs. APR alone can help you decide which loan to go for.

During tax season, you may notice that the loans market becomes more active. This is because banks offer a lower APR during tax season on personal loans.

In fact, banks offer various types of promotion throughout the year, such as extra rebates for online applications, interest discounts or fee waivers. These special offers sometimes rival those offered during tax season. So, it's always worth shopping around and doing your research before applying for a loan.

So, how do you calculate interest rate on a loan? Lenders usually determine the interest rate for you by looking at your financial status, debt servicing record, personal credit score and occupation.

The most decisive factor is your credit status as reported by TransUnion, a credit reporting agency. This has a direct impact on your approval result, loan amount and interest rate.

This score is calculated based on your borrowing and credit card usage status, repayment history, debt and even bankruptcy record. Overdue records will also affect your credit score. The higher your credit score, the better your interest rate. A low credit score can affect the interest rate as well as the loan amount. The loan application might even be rejected.

Developing good financial habits like the following can help bring your credit score up:

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Have your proof of income, address, and other necessary documents ready so you can submit them right away when asked. Providing your bank with your latest proof of income will help speed up future credit applications too.

In general, any Hong Kong resident aged 18 or above with a monthly income of at least HKD5,000 can apply for a personal loan from HSBC. The loan options available are diverse, ranging from instalment loans to revolving credit facility and loan redraw.

It's easy to apply for a personal loan. You can apply via the HSBC HK App, online banking, our 24/7 application hotline, or at one of our branches. Once all documents have been submitted, loan approval time can be as quick as just a minute. For details, please refer to the product pages.

To find out more about personal loans, feel free to call us on (852) 2748 8080, or apply online now.

To borrow or not to borrow? Borrow only if you can repay!