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2020 Tax Loans

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  1. #1
    bdw
    bdw is online now

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    2020 Tax Loans

    Tax loan season has started! DBS seem to be the first out of the gate, offering monthly rate 0.08% (APR 1.78%) when borrowing HK$1.5m+. This is aligned with previous years. Any other deals out there at the moment?

    These are perfect for expats who pocket a decent wage already and want to borrow at low HK rates to consolidate overseas debt and make repayments in HKD. Don't be a clueless expat as I was the first 5 years I was in Hong Kong, thinking a tax loan was for idiots who cannot afford to pay their taxes. These are in fact for the wealthy (typically including expats) to borrow money at ridiculously low rates.

    Especially expats that have overseas investments etc. Eg if you have a mortgage back home paying 3%, 4%, 5%+ interest rates, now you can borrow at 1.78% in Hong Kong, send the money home and pay off a nice chunk of that higher rate debt.

    You can even put your money in a HKD fixed deposit and earn 2.5% now. Borrow at 1.78% and earn 2.5%. It's ridiculous but true and better take this opportunity now before the banks realise what idiots they are and put a stop to this free cash giveaway craziness. Of course you need to be able to repay the loan while you money is locked in the fixed deposit, but you can take one for 6 months, one for 12 months etc to release your funds as the repayments are due. Also as I say for expats earning a decent wage who now are able to save a fair chunk of their salary each month, this loophole is absolutely perfect for you!

    If you have a mortgage in HK, typical rates are 2.4% now. Borrow at 1.78% to repay a 2.4% HK mortgage. I have local mates that do this every year and they are the ones who tipped me off to this tax loan giveaway in the first place.

    Really plenty of no brainer things you can do borrowing money at this low rate and making some small gains with it. Plenty of other more risky things you can do too! Buy HSBC shares that currently pay a 6.5% dividend, buy an overseas property outright somewhere like Malaysia, Thailand, etc.

    The possibilities are endless and if you are living in HK earning a decent package and you ignore this opportunity you really are missing out.

    https://www.dbs.com.hk/personal/promotion/tax-loan

    jgl, shri, Andy SNK and 10 others like this.

  2. #2

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    Agree that tax loans are a good source of cheap finance but my understanding is that the interest cost is not tax-deductible. If the higher rate loan which is being repaid is tax deductible then the spread shrinks from 0.62% (2.4-1.78) to 0.26% (2.4*.85 - 1.78). Still a saving but not as large as it first appears.


  3. #3

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    I assume you have to be a permanent resident for these offers?


  4. #4

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    Quote Originally Posted by rayhappyexpat
    I assume you have to be a permanent resident for these offers?
    No
    shri likes this.

  5. #5

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    Permanent residents are offered better rates.

    shri likes this.

  6. #6

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    Quote Originally Posted by TheBrit
    Permanent residents are offered better rates.
    And higher amounts (which is where the rates are better anyways..)

    Not all, but some banks, specially local banks will not offer loans if you do not have a PR.

  7. #7

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    What tenor are these loans typically offered for, is it only 1 year? Was thinking of buying an apartment some place like Saigon with one of these loans, but tenor is key - or do I just cycle to a loan with a different bank the following year?


  8. #8

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    Quote Originally Posted by Paxbritannia
    What tenor are these loans typically offered for, is it only 1 year? Was thinking of buying an apartment some place like Saigon with one of these loans, but tenor is key - or do I just cycle to a loan with a different bank the following year?
    Anything from 1 to 5 years.

    Past two ones I did were 3 years.

  9. #9

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    Thanks chaps. Guess I’ll take a look at what I can get.

    Often lurk on these forums and always appreciate the insights !


  10. #10
    bdw
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    You don''t need to be PR, but different banks have slightly different rules about how much you can borrow etc. But you do need to be earning a fairly decent wage to get the higher loans which are at the crazy low rates. But still for lower amounts you can still get very good rates. The DBS link above shows a table with the rate you can get for borrowing different amounts.

    I have seen terms of up to 5 years (60 months) previously. The DBS offer above maxes out at 2 years. I have one for 4 years with Citibank I am still paying off for another 15 months.

    I applied for the DBS one above yesterday just to see what happens (very easy just click a few links). I don't expect to get because I already have a few of these loans I am still paying for. But they called me back today offering me a max of $400k at 0.11% monthly rate (APR 2.54%). They checked my transunion record and know everything about all my other loans in HK so this is the max they will give me now. For me this is no point because I have a HK mortgage at just under this rate with an offset facility I can redraw from so not much point. If they offered me the best 1.78% APR then sure I would jump at it and just put the money straight into my mortgage offset and then think about whether to do anything fancy with it or not. If I can't make up my mind, just leave it in the offset and still make a 0.6% gain overall. But never mind, I might have to wait a year or two until my other loans are paid off before I can do again.

    jgl, shri, traineeinvestor and 1 others like this.

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