Tax Loan or Instalment Loan?

Everyone is unique, and so are their needs. Borrowers should understand the features of different loan products to select the "right" one. What are the choices among personal loans? How to calculate the interest rates? Which kind is most suitable for you? We compare different fixed loans to help you find the one best suit your needs.

Choose the right loans to suit different purposes

A fixed loan provides a fixed repayment period and monthly repayment amount. If this is your first time borrowing or if you prefer stability, a fixed loan is relatively simple and more suitable for you as it reduces the risk of going over budget. The most common fixed loan schemes include instalment loans, tax loans, and credit card cash instalment plans. Their repayment periods, loan amount limits and fees vary so that different purposes and requirements are satisfied.

Loans products comparison
-	Instalment loans	Tax loans	Credit card cash instalment plans
Main Purpose	Big-budget items, e.g. renovations, continuing education, a wedding or medical expenses	Paying tax, renovations, a wedding or continuing education	Small-budget items, e.g. shopping and traveling
Available period	Anytime	October to February every year (depends on promotional period)	Anytime
Features	Some banks offer "loan redraw" services	Usually lower interest rate than other loan schemes Allow borrowers to withdraw loans in 2 phases according to the tax due	No need to open extra loan accounts

Loans products comparison
-	Main Purpose
Instalment loans	Big-budget items, e.g. renovations, continuing education, a wedding or medical expenses
Tax loans	Paying tax, renovations, a wedding or continuing education
Credit card cash instalment plans	Small-budget items, e.g. shopping and traveling

-	Available period
Instalment loans	Anytime
Tax loans	October to February every year (depends on promotional period)
Credit card cash instalment plans	Anytime

-	Features
Instalment loans	Some banks offer "loan redraw" services
Tax loans	Usually lower interest rate than other loan schemes Allow borrowers to withdraw loans in 2 phases according to the tax due
Credit card cash instalment plans	No need to open extra loan accounts

Is simply choosing the longest repayment period a good idea?

When choosing a loan scheme, the length of the repayment period is probably one of the factors you would consider. You might think that starting with the longest repayment period is a good idea as you could simply make early repayments any time you have spare money, thus allowing you to save on interest. However, it may not work out this way. Some banks will charge an amount equal to a certain percentage of the loan amount or a specific amount as the early repayment penalty. Borrowers are advised to ask the banks about the related expenses for early repayment, including the amount of principal not yet repaid, penalty for early repayment and outstanding interest. Then, they could decide whether to repay early but only after careful comparison and the total amount of repayment.

In fact, some banks provide a cooling-off period. HSBC's Personal Instalment Loan offers a cooling-off period of 30 days. If applicants decide to cancel the loan within 30 days after the loan is approved, they only need to pay is the interest based on the number of day borrowed but no penalty on early repayment. Therefore, applicants' expenses are greatly reduced.

Find out more about our "30-Day Service Pledge".

For a personal instalment loan of up to HKD3,000,000 with a flexible repayment period, 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.

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