Banks V.S Personal Loan Companies

銀行_財務公司比較

13 Oct, 2020

  1. Lower interest rate for Bank Loans?
  2. Lower interest for Bank Loans?
  3. Are personal loans of loan companies more attractive in terms of benefits offered?
  4. Higher loan approval rate of personal loan companies?
  5. Which institution has higher loan amount, banks or personal loan companies?

The most important thing is that the differences of banks and personal loan companies: what should we pay attention to when applying personal loans?

For those who have never applied for personal loans, they are unfamiliar with loan interest, loan applications and various promotions, which is normal. No worries, let me explain all the things you need to know!

1. Lower interest rate for Bank Loan? & 4. Higher loan approval rate of personal loan companies?

Some of you may probably see bank ads, promoting their low interest personal loan products, speedy personal loans products with low interest or ‘Cash Loans Today; Personal loans with low interest’. It seems all promotions contain keywords of ‘low interest’ and ‘Personal loans’, but actually banks are more creative than you expect.

To be honest, 90% of current banks approve loans with lower interest when comparing with personal loan companies. Lending money is different from shopping, as the money lent by banks and personal loan companies are pretty much the same. ‘Lower interest rate; is actually the most attractive selling point; everyone wants to pay less when they have borrowed money from any banks or personal loan companies.

Well, you may want to leave this page after reading the previous part and apply loans from banks, but please give me a moment. We all know there everything is imperfect, and every coin has two sides. There is no absolute relationship between interest rate and interest, and we will talk about it in the second point.

1. 銀行_財務公司比較

Due to the lower interest rate, the difficulty of personal loans with lower interest rate is also high. Such financial institutions will check applicants’ TU Report, i.e. Transunion Credit Report, and see if the applicants have previously bankrupt, paid credit card bills lately or have any criminal conviction records before approving personal loans. As banks are regulated and supervised by Hong Kong Monetary Authority, banks will only provide their personal loans to customers with good repayment records. Such rule is also applicable to other loan products provided by banks, including mortgage loans.

In other words, if you have repaid personal loans/credit card bills lately or applied numerous personal loans/credit cards, you are advised not to apply personal loans provided by banks, all above mentioned acts adversely affect TU grade.
What else can these customers do? Does that mean they cannot apply personal loans? Personal loan companies can help!

Although most of the personal loan companies also check customers’ TU report, i.e. TransUnion Credit Report, the requirements are less stricter when comparing to banks. Usually, personal loan companies take TransUnion Credit Reports into consideration when deciding the loan amount approved. As there are a significant number of such customers, customers with poorest TU grade, who continuously made late repayments or previously did not repay their loans are also included, which is why the loan products provided by personal loan companies have higher loan interest rate when comparing with banks to maintain a balance of profit and loss and bear the risk of bad debts.

2. 銀行_財務公司比較

Lower interest for Bank Loans?

‘The interest rate is lower, which means the interest I need to pay is less!’, but remember, there is something called ‘Repayment Instalments’.

In fact, there is no absolute answer of ‘Which loan has lower interest, bank loans or loans of personal loan companies’?

Although the loans provided by banks usually have lower loan interest than personal loan companies, 90% of banks offer personal loan products with fixed repayment amount and period. The loan interest rate is lower, but loan repayment period usually lasts for 3-5 years, which means the interest customers actually needs to pay is higher than expected.

3. 銀行_財務公司比較

On the other hand, personal loan companies, such as Cashing Pro Limited, offers personal loan products with flexible loan repayment period, which allows customers choose the monthly repayment amount* and repayment period*. Customers can make full loan repayment anytime they want without any extra interest or handling fee incurred. Another selling point is ‘Lower interest incurred with lower loan principal’: after you have repaid the monthly minimum repayment amount, i.e. monthly loan interest, you can choose to repay more. For example, apart from the monthly minimum interest, if you have repaid $1000 more, the loan principal will be deducted by $1,000. In other words, reduced loan principal means lower interest in the coming month.

As mentioned above, although the loan interest rate of personal loan companies is higher than banks, the flexibility of loans in terms of loan repayment amount and loan repayment period is higher; bank loans have lower loan interest rate but linger loan repayment period. In this sense, it is hard to determine if the loan interest of banks is lower than personal loan companies.

Overall, if you want to make lower monthly loan repayment and do not remind longer loan repayment period, you are advised to apply bank loans(given the fact that you have good TU grades).

If you borrow the money for short-term cash flow, you are advised to apply personal loans provided by personal loan companies.

Cashing Pro-Personal Loan Service - https://cashingpro.hk/en/express-loan/

3. Are personal loans of personal loan companies more attractive in terms of benefits offered?

It depends. Banks mostly offer cash rewards, while personal loan companies often offer free video game consoles or movie tickets and sometimes offer cash rewards. Although most of the personal loans mainly offer cash rewards-it does make sense, as cash rewards are more attractive for people who are about to borrow money-, sometimes the gift rewards are very attractive as well! Let me share some of those attractive ones.

The most expensive ones usually include
Smartphones

4. 銀行_財務公司比較

The expensive ones usually include
Nintendo Switch Console
PS4

5. 銀行_財務公司比較

Round-trip air tickets to Japan/South Korea/Taiwan
Bluetooth earphones

6. 銀行_財務公司比較

Common ones usually include
Supermarket cash coupons, movie tickets

But remember, regardless of of banks or personal loan companies, their advertisements will only state ‘Applicants who successfully withdraw loans can receive gifts of xxxxx.’, in which Terms and Conditions are applied. For example:

  1. The customers need to withdraw the loan of $100,000 or above.
  2. The annual loan interest rate is XX% or above.
  3. The loan repayment period needs to last 3 years or above.
  4. The promotion only last for a period of time.
  5. The promotion is only applicable to new/current customers.

(It depends on the actual value of the goods, i.e. the more expensive the gifts are, the more requirements the personal loan companies introduce.)

Because of that, you need to think twice before applying for loans.

7. 銀行_財務公司比較

4. Which institution has higher loan amount, banks or personal loan companies?

Usually, in terms of personal loans, banks have higher loan approval amount when comparing to personal loan companies, which can be explained easily: As point 1 and Point 4 mentioned, banks only offer their loan products, including credit cards and personal loans, to customers with better loan status, who repaid their loans on time and had autopay salary. Some of them may even have monthly salary of $50,000 or above or currently lived in self-owned housing. Due to these factors, banks are more willing to approve loans of one million dollars (highest loan approval amount can reach 1.5 million dollars). However, more time is needed for banks to review the personal loan products, especially when you do not have an auto-payroll account at the bank where you have applied for personal loans.

In other words, if you are suddenly short of cash, you are advised to borrow money at personal loan companies: they can review the loan applications within a short period of time and transfer the money to the bank account on the same day after successful loan approval.

8. 銀行_財務公司比較

A Quick Summary

The following is a summarization of differences of personal loans provided by banks and personal loan companies (Cashing Pro Limited).

If the applicant’s TU grade is on the average level…

BanksPersonal Loan Companies
(Cashing Pro Limited)
Student LoansNo
(Unless Full-time employment proof can be provided)
Yes
(Employment proof is not required)
No Income-proof LoansNoYes
(Accepts applications of tertiary students, persons of cash salary and housewives)
Loan Approval RateMiddleHigh
Highest Approved Loan Amount$1,000,000
(in the usual cases)
$300,000
Annual Percentage Rate(APR)LowerHigher
Loan Repayment Period1-5 yearsFlexible loan repayment period within 5 years
Early Loan Full RepaymentHandling fee incurredNo handling fee incurred
*Above information is based on the average data of most of the banks in Hong Kong, in which above information does not fully reflect the situation of any banks in Hong Kong.
Apart from the information of Cashing Pro Limited in the above table, the information related to banks is for reference only.
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