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Look no further if you are searching for the perfect tax loan plans. MoneyHero simplifies the process by bringing together tax loan plans from major banks, virtual banks and finance companies in Hong Kong. We compare everything from Annualised Percentage Rate (APR) and welcome offers to application requirements, making it a breeze for you to find the most pocket-friendly tax loan. We go the extra mile by providing you with information on the different ways you can use your tax loan.
What is tax loan?
Tax loans are specialised loan products launched annually during the tax season. Most banks offer tax loans from October to November, with application acceptance continuing through April of the following year. While designed to serve as a lifeline for individuals navigating the challenges of tax payments, these loans also provide a valuable financial resource that can be used for various purposes that involve significant expenditures, including investments, further education, and home renovations.
Advantages of tax loans
The greatest advantage of tax loans lies in their lower interest rates compared to regular installment loans, often hovering around 2%. In fact, 2023 has seen the introduction of tax loans with impressively low APRs, reaching as low as 1.65% from certain banks. With a loan amount typically equivalent to 10 to 12 times the monthly salary, coupled with enticing cashback incentives, these time-limited loans provide immense financial flexibility for individuals to effectively manage their tax obligations while pursuing important financial objectives. Nevertheless, it is important to note that their repayment periods are often shorter than those of personal loans, usually ranging from 12 to 24 months.
How to choose among tax loan offers?
Cash rebate
There are usually special welcome offers available for new customers when it comes to application for tax loans. Extra rewards are usually available, especially when you apply through MoneyHero, which maximises the value you get out of the loans
Annualised Percentage Rate (APR) vs interest rate
When applying for a loan, it's important to look beyond the advertised lowest interest rate and take the time to fully understand how the interest is calculated. Some loans may only mention the monthly flat rate, so it's crucial to inquire about any handling fees or administrative charges that may apply, and consider the Annualised Percentage Rate (APR) as the reliable benchmark for loan comparison. Additionally, be aware that the lowest APR shown in certain loan advertisements may already include cashback incentives. In such cases, it's essential to identify the APR before cashback deductions, for a fair comparison with other loan options.Loan amount
The majority of tax loans offer a maximum loan amount equivalent to 10 to 12 times the monthly salary of the applicant. The final approved APR and available cashback incentives can vary depending on the specific loan amounts.
Monthly repayment amount
Tax loans are fixed installment loans with predetermined repayment periods and fixed monthly repayment amounts. The monthly repayment amount is calculated based on the loan amount, length of repayment period, and APR. Before committing to a loan, assess your financial situation and ensure that you have enough funds to cover the monthly repayment and also maintain sufficient cash flow to meet your daily expenses.
Length of repayment period
Even for the same loan amount, different repayment periods can result in varying interest charges. This is true especially for tax loans, where opting for a longer repayment term may not necessarily be better. Certain banks offer low-interest deals that are applicable only to shorter repayment periods, such as 12 to 24 months. If customers opt for a repayment period of 36 months or longer, the interest charges may significantly increase. It's important to carefully consider the repayment period and associated interest costs when making loan decisions.
Approval requirements
Different from regular loans, Tax loan applications have the additional requirement of providing tax returns, in addition to the usual supporting documents for income verification. If you are unable to provide income proof, obtaining a tax loan from a bank can be rather challenging. In such cases, it is advisable to consider tax loans or personal loans offered by lending companies to meet your financial needs.
Maximum loan amount
The maximum amount of tax loans offered by banks can reach HK$3 million to HK$4 million. However, borrowers are generally limited to borrowing up to 12 to 23 times their monthly salary.
Be careful of hidden terms and conditions
To secure the lowest interest rate for tax loans, specific criteria must be met. Firstly, the loan amount often needs to be HK$1.5 million or above, with a repayment period of 12 to 24 months, in order to qualify for the lowest interest rate. Moreover, banks typically reserve the lowest interest rate offers for preferred customers or those with a good TU credit score. This may include applicants who hold certain occupations, maintain a certain level of relationship with the bank, or receive their salary through an account with the bank in question.
Are tax loans only for tax payment?
Although tax loans are primarily intended to offer low-interest borrowing solutions for tax payments, banks do not impose restrictions on the use of these loans. This allows borrowers the flexibility to utilise tax loan funds for a wide range of financial needs and plans, such as home renovations, weddings, pursuing higher education, or even improving overall cash flow, all at an APR as low as 2% or even lower.
How to apply for a tax loan?
Similar to regular loans, the application process for tax loans is available online, by phone or even in person at bank branches. The required supporting documents usually include Hong Kong identity card, tax demand note, income proof, and address proof. After completing the application, the bank or financial institution will inform the borrower of the approval result for the tax loan. MoneyHero provides a detailed side-by-side comparison of different loan options available in the market, making it easier for you to make a well-informed decision when picking the loan that aligns best with your needs.
How long does loan approval take?
Many banks offer the convenience of online application for tax loans. Once all the necessary documents are submitted, borrowers can receive approval results as quickly as the same day, and the funds can be swiftly transferred to the designated bank account on the very same day as well.
Tax Loan FAQ
How much should I borrow and afford?
While the maximum loan amount for tax loans from banks can range from HK$3 million to HK$4 million, borrowers are only allowed to borrow up to 12 to 23 times their monthly salary. As a general recommendation, it is advisable to restrict the loan amount to what is truly necessary. A common rule of thumb is to ensure that your total loan repayments, including mortgages and credit cards, do not exceed 30% to 40% of your gross monthly income.Are there any extra handling fees associated with tax loans?
There are no extra handling fees with Tax loans compared to regular loans. However, it's important to note that late repayments or early repayments may result in different penalty interests or additional charges, similar to those associated with regular personal installment loans.
What do I need to prepare for my tax loan application?
When applying for a tax loan from a bank, you are often required to upload your identity card, income proof, and address proof, but some banks may waive the requirement of income proof for customers who receive their salary through the bank’s payroll account. Certain banks may also require applicants to upload their tax demand notes as part of the application process.
Are there any penalties if I do not repay on time?
In the event of late repayment, customers will be required to pay additional overdue interest. It is calculated as a certain percentage of the principal amount due for the current period, along with additional handling fees. The APR of late repayment penalty interests can reach as high as 30% to 40%. Moreover, it can have a detrimental impact on your credit score. It is therefore crucial to remember to make timely repayments to avoid these consequences.
Tax loans are special loans that usually offered from during tax season from October through April of each year while customers can borrow personal loans any time of the year. Tax loans generally offers lower interest rates with smaller loan amount and shorter repayment period. In Hong Kong, banks like BEA, Bank of China, Standard Chartered, Citibank and Fubon bank will provide tax loans starting from mid-October to help customers.
The repayment period for tax loans is usually 12-24 months and some banks even offer loan tenor of six months. The maximum loan amount that applicants can borrow can be up to 10-12 times of their monthly salary.
In general, there is not much difference in the procedure of applying for a personal loan and a tax loan, but you have to submit your salaries tax assessment demand notes during application for tax loans. You should also check if the bank will charge you handling fee and early repayment fee, or provide special offers such as cash rebate and handling fee wavier. Compare annualized percentage rate (APR), interest rates, total repayment amount and tenor at MoneyHero now to find the tax loan that best suits your needs.
The application requirements of tax loans are usually similar to those of personal loans, and the application processes are simple and convenient. Generally, all applicants can apply online or by phone, or visit any branch for inquiry. Supporting documents include Hong Kong Identity card, tax demand note, income proof and residential address proof. After completing the application, the bank or financial institution will inform the borrower of the approval result.
The nature of tax loans and personal loans are actually rather similar, but since the interest rates of tax loans are usually lower, some applicants may spend the loan money on specific purposes other than tax payment, such as investment and credit card payment. Please keep in mind that tax loans are short-term loans with the maximum repayment period of two years; and the late payment interest penalties could be very costly, which means you have to bear high risks if you spend the tax loan money on long-term investment.
Interest rates charged on tax loans are generally lower than for personal loans. Nevertheless, the usual repayment period of a tax loan is much shorter than other types of loans, and the max. loan amount is relative lower than other loans. The actual interest rate of a tax loan is affected by loan amount and repayment period.
You should compare tax loans offered by different providers using the APR, an annual rate that shows the total yearly cost of borrowing, including any fees and additional charges associated with the loan. This gives you a much better idea of which tax loan costs you the least.
Generally, you can apply for tax loans from October through April of each year.
Intense competition appears in the tax loan market every year during the tax season in Hong Kong. In that period, every bank launch new tax loan offers to attract customers with the wording of "lowest interest rate", making it hard for consumers to make a wise decision. MoneyHero is a free financial comparison platform that provide the latest information on tax loan products. We keep the list updated in order to help consumers to compare tax loan products at one glance.
Some banks offer additional discounts for online applicants no matter they are new or existing customers. To maximize your savings, find out which lenders offer these promotions through MoneyHero!
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