Hong Kong residents apply for personal loans to pay for a variety of expenses. They might be hoping to get their homes renovated, or they might want to buy a new car, or perhaps go on a trip out of the country. They might need to secure funds to pay for emergency expenses like hospital bills caused by an unexpected illness. Regardless of the reason, personal loans in Hong Kong are the flexible, short-term solution to many money problems.
A What Personal Loan in Hong Kong Exactly is a Personal Loan?
A personal loan is a type of unsecured loan, which does not require any collateral. The amount of money borrowed will depend on the borrower’s monthly income and credit history. Personal loans usually allow people to borrow smaller amounts of money to equivalent multiple amounts of their income, as opposed to secured loans, which depend on the collateral. Personal loans also have shorter repayment periods at 12 to 60 months. In Hong Kong, personal loans are typically used to:
A What Personal Loan in Hong Kong Exactly is a Personal Loan?
A personal loan is a type of unsecured loan, which does not require any collateral. The amount of money borrowed will depend on the borrower’s monthly income and credit history. Personal loans usually allow people to borrow smaller amounts of money to equivalent multiple amounts of their income, as opposed to secured loans, which depend on the collateral. Personal loans also have shorter repayment periods at 12 to 60 months. In Hong Kong, personal loans are typically used to:
• Pay for discounted items, tax bills, or tax loans
• Complete payment for educational fees
• Unite credit card debt and get lower interest charges
• Finance preparations for marriage
• Pay for other emergency expenses
Types of Personal Loans
There are two types of personal loans: installment loans and revolving loans. With today’s technology, we can easily compare different types of loans online. All we need to do is to be meticulous in choosing one. Installment loans require borrowers to make fixed installment payments over an agreed period in order to pay off the loaned amount. On the other hand, revolving loans are like credit cards in the sense that the bank sets up a revolving loan facility and decides on maximum amount customers may borrow. Borrowers can frequently take revolving loans, as long as the total amount they borrow will not exceed the credit limit established by the bank. The advantage of revolving loans is that borrowers are not required to pay on a schedule. Another benefit of a revolving loan is that they can get their original credit limit once they have paid off the loaned amount.
Comparing Personal Loans
We’ve covered what personal loans are so , now let’s talk about finding the right personal loan specific needs. Below are some factors to consider when choosing a personal loan:
1. Additional Charges
Read and thoroughly understand the fine print of the terms and conditions first before applying for a personal loan. Most personal loans involve paying off additional charges apart from the loan amount, such as:
• annual fees for revolving loans in order to maintain the loan facility
• administrative fees for installment loans that are automatically paid with the monthly installment fee
• prepayment fees for paying full installment loans in advance
• late charges for making late monthly loan payments.
2. Credit History
Maintaining good credit history is important to be able to secure personal loans with lower interest rates. Poor credit history can put you at a disadvantage, because banks might charge you higher interest rates to approve your personal loan or they might even reject your application. Request a credit report from Transunion to know about your credit history.
3. Interest Rates
Interest rates vary for different types of personal loans. Revolving loans employ effective interest rate, where the interest is charged every day, depending on the outstanding loaned amount. To reduce your interest, you need to make loan repayments every now and then until you settle the loan. Installment loans, on the other hand, employ a flat interest rate. A monthly fixed interest rate is charged on top of the original loan amount regardless of the periodic loan repayments.
4. APR
The Annualized Percentage Rate (APR) is another factor to consider when applying for loans. The standardized APR is calculated in compliance with guidelines established by the Hong Kong Banking Association and the DTC Association. Computing for the APR is the best way to compare interest rates, the fees such as annual fees and administrative fees, along with other charges.
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