Tax Loan Strategy
As the year end approaches, major banks are grasping the opportunity to launch tax loan programmes. However, do you know the differences between a tax loan and a personal loan? What should we look for before applying for a tax loan? Have a look now.
What is the purpose of a tax loan? Is a tax loan just for paying taxes?
As its name suggests, the main purpose of a tax loan is to pay taxes. In earlier times, some banks even paid tax bills directly on behalf of the applicants. But now,some banks don't have any strict requirements for a loan purpose. It can be used for tax payments as well as funds for other plans, like a home renovation, marriage, continuing education or cash flow.
How long is the repayment period? How much can be borrowed?
In general, tax loans come with a shorter repayment period, but most of them offer at least 24 months. Similarly, loan amounts are comparable to other personal loans. Some tax loan amounts could be over 10 times your monthly salary and not limited to the tax payable.
Should I pay attention to the Annualised Percentage Rate (APR)?
Similar to other personal loans, consumers should pay particular attention to APR when choosing a tax loan and to not be attracted simply by a low rate. The calculation of APR includes all applicable interest rates, handling fees, other charges, rebates and rewards. It's an indicator that allows applicants to understand the exact borrowing cost with ease. Consumers should "shop around" comparing relevant information and terms provided by banks before applying. For the same loan amount and same repayment period, the lowest APR represents the best deal.
How much to borrow?
Interest charges of tax loans are lower than other personal loan product. However, consumers should be pragmatic when deciding how much to borrow. Of course, extra loan amounts could be used as a cash reserve, but beware of the additional interest expenses involved. In order to minimise lending cost, you may opt for loans that can be withdrawn in two instalments. In this way, you can drawdown loans according to the tax payment due date so that interest expenses are saved.
Check out our tips on how to borrow wisely to help you make an informed borrowing decision.
How to apply?
Tax loan application procedure is the same as for other loan products. Consumers can apply for a tax loan through bank branches, websites or mobile apps. Some banks even provide a 24-hour application hotline service to suit your needs. If you need cash flow in this tax season, please feel free to call our Application Hotline at (852) 2748 8080, complete the application online, or apply in a few steps via the HSBC HK Mobile Banking app.
To borrow or not to borrow? Borrow only if you can repay!