When the tax season finally dawns in Hong Kong, you need to file your tax returns and clear money you owe the Inland Revenue Department (IRD). If you fail to pay this debt on time, it can have huge implications, such as attracting severe penalties.

If you are short of cash to clear tax debts, there is no need to panic because there are several options. One of the best moves is taking up a tax loan. Keep reading to understand more about tax loans in Hong Kong, comparison alternatives, how to apply and the best tips for tax payments.

What is a Tax Loan?

A tax loan is a common financial product offered by lenders in Hong Kong to help clients pay the debts they owe IRD. Most people take tax loans during the tax repayment season when filing their income tax and are required to clear tax-related debts for the previous year. The tenure of a tax loan is typically shorter than that of other bigger loans and lasts for about 12-24 months.

Like other types of cash loans or alternative forms of credit available in Hong Kong, a tax loan is approved pretty fast. You can have the cash approved in a couple of days, saving you plenty of time and allowing you to sort out your tax payment immediately. In some cases, the loan can be approved on the same day.

Tax Loan Comparison

While we have mentioned that taking a tax loan is one of the top tips to gain an influx of credit, it is also important to understand other alternatives. Here is a comparison:

Using a Personal Loan to Pay Tax Bills

A personal loan can be used for almost any purpose, including paying your tax bills, making it one of the top saving tips. The lovely thing about personal loans is that you are allowed to borrow a wide range of amounts, depending on your loan limit. Note that the ceiling will mainly be pegged on your credit score, debt, and income.

A personal loan can be secured, which implies that you have to provide collateral (this could be a savings account or a certificate of deposit with the lender), or unsecured. An unsecured loan does not require collateral. So, think wisely when choosing the right loan for you when opting to pay your taxes and keep an eye on the repayment conditions too.

Using collateral lowers the risk that a lender takes to lend the money because it is easy to seize the collateral if the borrower is unable to repay after getting the credit needed to pay off their taxes. Although a secured loan lowers the risk for the lender, it raises the risk for the borrower.

Using a Home Equity Loan

If you have a home, it is also possible to borrow against it and use the cash to pay tax bills. A home equity loan, also referred to as a second mortgage, allows you to borrow money against the equity of your home and is one of the easiest ways to get the credit you require to settle your tax payment in Hong Kong.

The amount you get through home equity is usually the difference between your mortgage balance and current market value. The primary advantage of using home equity loans is that they are easy to obtain and attract low-interest rates. However, defaulting can easily result in foreclosure.

Offer In Compromise (OIC)

If you are having trouble clearing your tax debts, one tip is to possibly set up an Offer in Compromise (OIC) with your lender or bank. OIC allows you to pay off your tax debts in less than the actual amount owed. To qualify for an OIC, your lender will look at your income, expenses, and ability to repay. Consider going for OIC as an option of last resort.

Credit Cards

We must indicate that taking a loan to clear another is not a good tax tip for anyone, but if you are out of options, using credit card credit might work. When you decide to pay tax bills using a credit card, the main benefits are in the form of rewards and interest rate promotions.

Furthermore, you are likely to secure funding, even with a poor credit score. However, credit card loans are likely to attract more interest compared to personal loans or equity home loans. Furthermore, defaulting can result in huge penalties and damage to your credit score, meaning it is worth taking a step back and weighing up whether this is the right tax repayment method for you.

Why You Should Go for a Tax Loan Hong Kong

Now that you know the different tax saving tips available, from personal loans to credit cards, we will now dig deeper into tax loans HK and explore their benefits. Here are the main reasons why you should go for a tax loan in Hong Kong.

Fast Processing

If you are filing tax returns in Hong Kong when the repayment deadline is pretty close and want to take a loan to cover the debt, loan options that take a lot of time to get money into your account might be undesirable. However, you can count on tax loans in Hong Kong because they are processed fast and funds are subsequently released into the borrowers’ accounts. Lenders understand that clients need to clear tax bills and can disburse the loan even in one day for eligible borrowers.

To apply for the loan, use our simple online application form, compare your offers and identify the preferred lender and loan. When you have chosen an offer, we will book you an appointment at the lender’s office for final approval and disbursement. At this appointment, most lenders will ask for supporting documents, such as proof of income, employment details and bank statements. If the lender needs additional documents, you can simply upload them immediately in your Lendela account or bring them to the lender’s office, to have the tax loan processed fast.

Fast clearance implies that you have the opportunity to beat the tax debt repayment deadline even if only a few days are remaining. What a good way to avoid penalties for non-compliance or getting into conflict with the Hong Kong administration.

Short Repayment Period

When submitting a loan application, the loan tenure plays an important role in determining the total amount payable. Even if you are only paying a small amount as instalment every month, over an extended period, the total amount payable will be high. Because tax loans in Hong Kong have a short tenure of 12-24 months, the total amount payable will be lower compared to loans with longer tenures.

Being able to clear the tax loan in a short period also gives you an opportunity to borrow more if the need arises, saving you the hassle of having to start your search from scratch. As you pay the loan, it is also a chance to build a good rapport with the lender so that accessing credit in the future will be easier.

Gives You an Opportunity to Clear Tax Bills

The Hong Kong administration strictly enforces tax compliance on the island, and you can be penalised heavily for non-compliance. If you are yet to clear your tax debts and the deadline is tight, a Hong Kong tax loan is a stress-free method of ensuring the payment goes through. See – the loan makes it possible to clear the tax debt and repayments are usually done in 12-24 months.

Lower Interest Rates

When applying for a loan, one of the most important considerations is the interest rate because it determines the total amount payable. In Hong Kong, tax loans attract lower interest rates than other loans. However, this trend is changing and lenders are now raising interest rates.

Since the interest rates charged by lenders are different, it is advisable to ensure you compare them before deciding who to borrow from. In addition to the tax loan interest rates, a useful tip is to always be on the lookout and avoid borrowing from lenders with hidden fees as you will end up saving a lot of money. Lendela’s lenders are always transparent should there be fees related to the loan that they offer, and will make sure that you know about them before you decide which loan to go with.

You Do Not Require a Collateral

The great thing about tax loans is that they do not require any collateral to be approved. All that you need is proof that you are able to repay the loan for it to be approved by the lender. Therefore, even if you do not have collateral, such as a house or car, it is still possible to get a tax loan and clear your tax debts.

Most lenders will only ask for bank statements for the last few months to establish whether you are able to repay the loan. They will also check your credit rating to determine your creditworthiness. If you are eligible, the loan is approved fast and the money deposited to your account quickly, so you can make your tax payment right away.

Predictable Repayment Schedules

Another reason why you should consider tax loans in Hong Kong is because they come with predictable repayment schedules. Upon approval, you will be able to learn the exact amount to pay every month, the number of months to repay the loan, and total interest. The predictability allows you to do the following:

  1. Easily compare the tax loan offers from different lenders to be sure you are working with the best.

  2. Budget appropriately for repayment to avoid being late with instalments or interfering with other aspects of your life.

  3. Use the loan to build your credit rating.

As you go through the benefits of using a Hong Kong tax loan, it is also crucial to appreciate that it has its own share of disadvantages. The most notable of these is the risk of penalties if you default on the repayment of the loan. Furthermore, defaulting can also have negative implications on your credit score. So, it is prudent to ensure you pay all the instalments as agreed with the lender as it will end up saving you from a lot of potential trouble down the line.

Offers a Good Opportunity to Build Your Credit Score

Every time that you want to borrow money from a financial institution, your credit score features permanently. If you have a poor credit score, the interest rates on loans will be higher compared to what others with excellent credit get. With a tax loan, you get an excellent opportunity to build your credit score in the following two ways:

First, you are able to clear the loan fast because it is only offered for a period of 12 to 24 months. If you clear the loan fast without defaulting, credit reference agencies will recalculate the credit score, and it is likely to move up. If the lender does not have a prepayment penalty, a useful tip would be to consider clearing the tax loan even before the closure of the loan term.

Another way that tax loans can help to build your credit score is because they enrich the credit mix. Credit reference agencies recommend that you should have a good credit mix to get a higher credit score. So, if you have other lines of credit, such as credit cards, the tax loan will be a great enrichment to your credit score.

How Much Tax Loan Can You Borrow in Hong Kong?

When you apply for a tax loan, one crucial tip is to be as clear as possible about the amount that you want to borrow. In Hong Kong, the maximum amount that you can borrow depends on the lender, with most of them allowing a maximum of $500,000.

While a loan lender who is ready to provide higher credit to applicants is a good option in the event that you want to borrow more, the focus should be the amount needed to clear the tax bill. If you need $100,000, but the lender is willing to release a maximum of $500,000, it is advisable to only go for what you need.

Four Must-Do Things before Applying for a Tax Loan in HK

To clear your tax bills, a loan with good conditions would come in handy. However, you need to prepare appropriately to ensure your records are in order and work only with the best lenders. Therefore, here are the four must-do things before applying for a tax loan in Hong Kong.

Compare Loan Conditions Offered by Different Lenders

One tip to identify a good tax loan in Hong Kong is  to compare the conditions offered by different lenders as you could end up saving money on interest or potential fees. Be on the lookout for loans that do not have clear interest rates because they are likely to have hidden costs. Instead of general pricing, such as "factor rate" or "cost," the loan you select should have a precise Annual Percentage Rate (APR). A well-defined APR makes it easy to determine the cost of the loan.

Other conditions of the tax loan include the repayment period and the possibility for renegotiation if you get stuck with paying back the amount you owe along the way. Only work with a lender that offers low interest rates, has no hidden costs, and is willing to help you improve your credit rating with time.

Decide the Amount that You Want to Borrow

The interest rates charged on tax loans are lower compared to other personal products. This can make people want to borrow more. However, borrowing more is likely to grow the total amount payable and the period of payment. Here are the three main considerations to factor when deciding how much to borrow:

  1. Consider going for an amount that is just enough to cover the outstanding tax bill. This will eliminate the risk of having to pay interest on additional funds that you did not need in the first place.

  2. If you can raise some money, consider only borrowing the difference to clear the tax debt. By raising some of the money for paying tax debts, it implies that you will borrow less and clear it faster.

  3. Only borrow the amount that you can comfortably repay. This is crucial to avoid defaulting and incurring penalties on the tax loan. Defaulting on repayments is also likely to damage your credit score.

Get Your Records in Order

Another tip before borrowing a tax loan in Hong Kong is getting your records in order. When applying for a tax loan, lenders will want to know you more. Therefore, establish the type of documents that they might need and have them ready when submitting the application. For example, most lenders ask for bank statements, personal identification documents, and proof of employment. The good thing about the required documents is that you can establish what is needed by simply visiting the preferred lender or talking to the support staff online.

Analyse Your Borrowing Options

Before placing your application for a tax loan, ensure to answer the following two questions, “What are the alternatives?” and “Which is the best one?” Your goal should be identifying the most convenient and affordable option when attempting to resolve your tax payment in Hong Kong.

Remember to check how the selected borrowing option affects your overall financial position. You better go with the option that makes it possible to achieve several objectives. For example, a tax loan from a good lender can help you to clear tax bills and build your credit rating. However, this is only possible if you can adhere to the repayment schedule.

Identifying a Good Tax Loan Lender

Although there are many lenders in Hong Kong, your goal should be identifying the best. Taking a tax loan without vetting the vendor can be risky because there are some with the sole target of optimising profit from borrowers who have an urgent need to complete their tax payment in order to avoid falling afoul of the Hong Kong authorities. To make it easy for you to identify the best tax loan Hong Kong, here are some tips that you should consider:

Research the Available Lenders

When looking for a good tax loan provider, technology is your best friend, so get down to business and research the different providers to determine what they have to offer. You can get a lot of information about a tax loan lender online and even compare offered services with those from competing companies. Lendela will help you with this. Via only one application at lendela.com, you will reach multiple licensed lenders in Hong Kong, compare their offers and get all the support you need in your comparison from our experienced Customer Service Team.

To get a lender’s commitment to delivering value to clients, it is crucial to focus beyond the flashy sites and promises posted on their pages. Instead, you should aim at identifying a transparent lender with diverse credit options for clients, years of service, and verified online presence. After using Lendela’s help, also take the opportunity to talk to the customer support of the selected lender and enquire how they protect applicant details and commitment to customer value.

If there is something that is not clear from the lender’s website, make sure to enquire from their customer support or ask us directly. For example, if the lender has not specified the APR for tax loans, we will provide support and break down everything for you. This will make it easy for you to know what to anticipate after taking out a loan for your tax payment.

Check what Other Borrowers have to Say about the Lender

Another method of determining the effectiveness of a tax loan company in Hong Kong is checking what past users have to say. With technology, you can easily follow sentiments about a specific lender by checking the comments section on their website and social media pages.

If the lender is a good one, you will find previous users giving a lot of positive feedback. It will also be easy to learn about the lenders whose services were poor so that you can avoid them. For example, “Does the tax loan from the lender come with hidden fees?”.

You might even interact with past clients, especially on social media, for a more candid chat about tax loan lenders in Hong Kong. Do not hesitate to ask them for an opinion on whether to work with a specific lender. Then, use the information from past users to make informed decisions about the best lenders. Luckily, Lendela is only working with lenders that are licensed and show 100% transparency towards their customers, so they can have peace of mind when making their tax payments in Hong Kong.

Read Expert Reviews about the Lender

In addition to checking the sentiments of past borrowers, you can get deeper insights into specific lenders by following expert reviews. Professional reviewers get deeper into individual lenders’ operations, allowing you to know them better. They dig into the history of a tax loan provider and write a comparative review to make it easy for you to make an informed decision. This is a great time saving tip as it will enable you to pick the right lender without having to worry about the possibility of being taken advantage of.

Because some of these expert reviews have a background in finance, it will be easy to differentiate between honest and unscrupulous lenders. If you find something that might impact the tax loan offered by a specific lender, go ahead and seek clarification from the reviewer. Remember to also counter check the facts in the event that a lender might have improved on some of the services.

Only Work with Licensed Financial Dealers

In Hong Kong, all financial companies are regulated by the Hong Kong Monetary Authority (HKMA). So, if you find a dealer is not licensed to offer lending services, it should serve as a warning that that might be a scammer. A good lender should have a license number and display it well for clients to see. One useful tip is to even verify the lender's license and operating details with the HKMA. Lendela only works with licensed lenders across Hong Kong and so you can trust that you always get offers from serious actors when applying for a tax loan via Lendela.

Consider Referrals

If you do not have enough cash to clear tax debts and are thinking of getting a loan, consider asking for help from close friends and colleagues. If your colleagues have experienced such a challenge in the past, they will refer you to the tax loan that helped them out. This might also be a good time to ask them more about the lender so that you can make an informed decision before borrowing from them in order to make your tax payment.

Note that even if a specific tax loan provider was a good option for your close friends, it does not mean that it will automatically be the case in your situation. Therefore, an important tip would be to carry out due diligence by checking the terms and conditions of the loans from the lender. Extend your evaluation to further ensure that the lender guarantees all borrowers the utmost safety of their data.

Good Customer Support

Think of the tax loan lender as a company that is trying to make a positive impression in the market. One of the things that such a company would require is good customer support. If a company has good customer support channels, it will be pretty easy to get the information that you require in order to make the right decision.

Important customer support considerations include professional support officers who are always ready to answer clients’ questions. You can even try to reach the support staff and enquire about the available tax loans and related conditions.

Other channels of customer support that you should check include live chat and direct email support. A live chat is preferred in most online inquiries because it is easy to use, prompt, and cheap. Like with support staff, consider testing the live chats to determine reliability in giving you the right information about the tax loan offered by the respective lender.

Other support facilities that you can use as an indicator of a good, reliable, and committed tax loan lender include a knowledge base highlighting related content. Some lenders even go a step further to advise their clients on good financial management. Such a lender will not just provide credit to help you with your tax repayment, but will improve your skills, leaving you in a better position to manage personal finances.

At Lendela, we offer you customer support all the way from application to disbursement, meaning that we will stay with you during the whole process, even when you have decided to go with a certain lender. We are always 100% independent and transparent with regards to our partnering lenders. We are here to help you get the best possible tax loan given your personal circumstances, but will always leave the final decision regarding the lender and offer to you.

Look Out for Red Flags

The primary intention of doing comprehensive research is to identify the best tax loan lender in Hong Kong. However, you should also be prepared to identify fraudsters and avoid falling into the hands of scammers. Every time that you reach out to a potential tax loan lender, it is important to be observant and identify red flags that can make it possible to scammers and avoid them. Here are some of the red flags that you should check.

1. Guaranteed Approval

If you notice a lender indicating that the loan’s approval is guaranteed, take it as a red flag. When you apply for a tax loan, the approval is always pegged on your ability to repay as well as your credit rating. Therefore, do not take the bait, thinking that the loan will be approved automatically. In some cases, such scammers are interested in identity theft, and an important tip is to note and avoid them, which will end up saving you even more trouble when dealing with the need to pay your tax.

2. Request for Funds before Loan Approval

The main reason you are applying for funds is because what you have is limited and probably not enough to clear the tax debt. Therefore, you should be careful about the lenders who ask you to pay some money, especially through wire transfers or other instant services, before the tax loan gets approved. Indeed, even the lenders who charge a processing fee allow users to use credit cards or other methods that can easily help to identify them. In other instances, lenders deduct the processing fee from the funds deposited into your account after the loan approval.

3. Unprofessional Sales and Services

Most lending institutions are very professional, and it is easy to find them anywhere they have some presence, be it on their websites or social media pages. So, if you are researching for a tax loan provider in Hong Kong, unprofessional sales services should serve as a red flag. For example, if you notice the site is having a lot of security errors from your browser, the chances are that you are dealing with a scammer. A good tip would be to try and avoid such sites as much as possible.

Another common red flag is a site that is full of grammar errors. This is a demonstration that the lender is not a serious one or is a scammer. Therefore it will be a good idea to walk away and continue searching for a more reliable and responsible tax loan lender.

Note that an easy way of steering clear of unserious lenders is to use a service like Lendela’s. As we only work with licensed lenders, we will make sure that you will not engage with any “red flag lender” through our tax loan matchmaking service.

How to Apply for a Tax Loan Hong Kong

The process of applying for a tax loan in Hong Kong is very straightforward when using Lendela. Although the internal processes might differ slightly from one lender to another, here are the main steps that you should anticipate to follow:

1. Submit the Application Form and Upload Documents

Once you have decided to take up a tax loan, the next step is to apply for it. This is easily done online via a service like Lendela’s. Our application form requires you to provide personal details, such as Hong Kong ID, name, and profession etc. This information serves as the foundation for all our connected lenders, so that they can assess your application and feed back tax loan offers within a short period of time so that you can opt for the one you prefer and make your tax payment.

After the application is submitted, you can upload necessary documents such as proof of residency (e.g. a utility bill or recent bank statement) and payslips in your Lendela account. Other documents that might be needed include the last notice assessment and demand for tax. If the lender needs you to provide additional documents after your application submission, you will receive this information in your account before selecting an offer.

2. Select an Offer and Book an Appointment

After submitting the application form and the required documents, you are ready to choose between the offers that have been returned to you by the different lenders. This is easily done in your Lendela account dashboard, which is a great time-saving tip when you are in a rush to pay your tax. After this is done, Lendela will help you to schedule an appointment at the selected lender’s office, for final processing and disbursement.

3. Disbursement of Funds

At the lender’s office, you will first receive the final approval of your application and after this, the funds will be disbursed. If you upload the necessary documents prior to your appointment and all your application details are accurate, it should not take more than 24 hours from application to disbursement of the tax loan (this is also subject to your appointment at the lender’s office).

If you have an outstanding tax debt, a tax loan can help you to clear it and avoid getting into conflict with the authorities. Because tax loans are easy to apply and attract low-interest rates, you should not let the tax bills overwhelm you. Use this guide to learn how to apply for a tax loan, get the credit amount approved fast, and make your tax repayment as stress free as possible.

Key Takeaways

  • 稅務貸款屬私人分期貸款的一種。部分銀行或財務公司未必以「稅貸」名義推出貸款產品,但亦會在稅季加推優惠,或於稅季提出與稅貸性質接近的私人貸款。
  • 稅務貸款的年利率極低、還款期短、申請手續方便,更會推出不同優惠來吸引上班族;但稅貸的貸款額會比一般私人貸款較低,而產品亦會受到利率周期所影響。
  • 傳統銀行、虛擬銀行,及財務公司均會推出稅貸產品,其實際年利率、還款期、門檻和相關優惠也不盡相同。
  • 借貸人在申請任何貸款產品前,應該先了解產品的利息計算方法,留意手續費及附加條件,貨比三家才再作決定。