Personal loans offered by banks and financial institutions in Hong Kong are often categorized as “unsecured loan”, that means borrowers do not have to provide any collateral to the financial institutions. A loan application typically only requires an application form, HKID, proof of income and an address. Most recently, some financial institutions start to offer loans without requiring any proof of income or address which helps to greatly simplify the personal loan borrowing process.
One of the most important factors to consider before borrowing money is the Annual Percentage Rate (APR) which is an indicator of interest rate commonly used by HKMA authorized lenders (Read more about the impact of interest rate on interest expense). APR indicates total yearly interest expense (without taking into consideration the effect of compounding), so it is important to understand APR offers in the market and consider other key components such as maximum loan amount and the repayment period.
Personal Loans APR & packages comparison:
| Financial institutions | Loan package | Minimum Annual Percentage Rate (APR) | Loan amount (whichever is lower) | Features / remarks |
| Airstar Bank | Airstar personal loan 👉 Learn more | 1.85% | 12 times of monthly salary or 1 million | 0$ handling fee, 5 minutes to disbursement, No income / address proof |
| Citibank | Card debt consolidation loan | 4.26% | 21 times of monthly salary or 1.2 million | The loan is used to clear credit card debt |
| AEON | Flexi personal loan | 4.49% | 8 times of monthly salary or 0.8 million | No handling fee |
| Promise | Personal loan | 4.49% | 0.6 million | Get up to 100,000 loan without any income or address proof |
| Hang Seng Bank | Debt consolidation loan | 2.91% | 21 times of monthly salary | Repayment period can be as long as 72 months |
Frequently asked questions about Personal Loans
The actual interest rate offered to borrowers depends on multiple factors such as borrower’s credit profile, loan amount, and repayment period – as such not all borrowers will be able to get the lowest Annual Percentage Rate (APR) possible as advertised by financial institutions.
Some of the most common types include installment, revolving and consolidation loans. An installment loan is the most common personal loan in Hong Kong, it is characterized by fixed monthly repayment schedule. A Revolving loan on the other hand offers more flexibility as the borrowers can decide when to drawdown then payback at their own pace. Lastly, a consolidation loan is a type of borrowing to payback one or more other loans – ideally higher interest one(s). Read more about consolidation loan here.
Traditionally, financial institutions typically take about one week to approve a personal loan application. However, with the aid of online application, application and approval can now be as fast as one day.
While APR plays an important role, borrowers should also consider other important factors such as repayment ability, handling fee, overdue penalty, early repayment fee and repayment methods.
The repayment period of any personal loan in Hong Kong can range between 3 to 72 months. The repayment period directly impacts the monthly repayment amount and overall interest expense. Longer repayment period means lower monthly repayment, but at the same time it will also increase overall interest expense due to compounding. Read more about the relationship between the repayment period and total interest expense here.
Financial institutions generally require documents such as identification documents (HKID/password), proof of address and proof of income. Some institutions allow the borrower to skip some document provision, however maximum loan amount will be lower as well.
Failing to repay the loan on time typically results in additional finance charges. Another important consequence is the impact of late repayment on credit score – having a bad credit score could result in loan disapproval or getting a loan offer but at a higher interest rate.
Financial institutions typically request handling fees or interest payback if borrowers want to repay their personal loans earlier. This means early repayment of personal loans may not always result in saving on interest expense so borrowers should discuss this option with their lenders before making any decision.
A secured loan uses collateral as a guarantee for repayment (mortgage is one example of a secured loan). On another hand, unsecured loan like personal loan, tax loan or even credit card do not have any guarantee for repayment, so their interest rate tends to be higher when compared to secured loan.
A loan guarantor’s role is to cover for outstanding loan amount if the original borrower failed to repay the loan. Having a guarantor can help to improve borrower’s chance of getting approval as this helps to reduce risk for financial institutions.
TransUnion (“TU”) is currently the only provider of personal credit report in Hong Kong. A credit report takes into considerations of past credit card, loan and mortgage application / payment information to compute a credit score which ranges from AA to JJ (AA being the best and JJ being the worst). Borrowers who manage number of credit card / loan applications well, while at the same time have good repayment habit tend to have better credit score and should not have any issue when applying for any type of loan.
