Tax Loan Strategy! Tips on what to look for before applications.

As the year approaches its end, major banks are grasping the opportunity to launch tax loan. However, do you know the differences between tax loan and personal loan in general? What should we look for before applying for tax loan? Have a look now.

Tax loan just for paying tax?

As its name suggests, the main purpose of tax loan is for paying tax. In earlier times, some banks even paid tax bills directly on behalf of the applicants. But now, most banks do not have any strict requirements of loan purpose. It can be used for tax payment as well as funds for other plans, like home renovation, marriage, continuing education, cash flow, etc.

How about the interest rate of tax loan in this year? High or low?

Previously, banks competed fiercely with ever lower tax loan interest rates to attract more customers. It might be different this year. In the midst of the rate hike cycle, the interest rates charged to tax loan this year would probably be higher than last year. Nonetheless, tax loan is still the loan product with the lowest rates of the year. Many consumers are closely waiting for the launch of tax loan in order to “borrow cheap money” for handling financial affairs.

How long is the repayment period? How much could 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. Tax loan amounts could be over 10 times your monthly salary and not limited to the tax payable.

Annualised Percentage Rate (APR) is the key.

Similar to other personal loans, consumers should pay particular attention to APR when choosing tax loan and make sure not to be attracted simply by a low rate. The calculation of APR includes all applicable interest rates, handling fees, other charges, rebates and rewards. It is an indicator that allows applicants to understand the exact borrowing cost with ease. Consumers should "shop around" and compare relevant information provided by banks before applications. 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 products, and loan amounts were raised substantially and are enough for paying tax several times. 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 minimize lending cost, you may opt for loans that can be withdrawn in two instalments. In this way, you can drawdown loans according to tax payment due date so that interest expenses are saved.

How to apply?

Tax loan application procedure is the same as other loan products. Consumers can apply for tax loan through bank branches, websites or mobile apps. Some banks even provide a 24-hour application hotline service to suit your needs around the clock. If you need money for tax payment or cash flow, please feel free to call HSBC’s 24-hour tax loan application hotline (852)2748 8080 or visit the official website.

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