Looking to borrow a substantial amount, such as $500,000, $800,000, $1,000,000, or even $2,000,000, for working capital or to pay off credit card debts? Many people choose personal loans (P Loans) from banks because of their low interest rates, strong reputation, and straightforward application process.
Generally, the larger the loan amount you apply for, the more cautious the bank will be during approval, and it may not be as easy to get approved as with smaller personal loans. This article outlines the key considerations when taking out a large personal loan or a loan to pay off credit card debts, helping you understand how to secure the best loan terms.
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Differences Between Large Loans and Small Loans
The loan market does not clearly define large and small loans. However, by comparing the features of loan products and the approval processes, it is easy to observe how banks and money lenders differentiate between them.
Interest Rates and Benefits of Large Loans
When it comes to interest rates, banks’ large personal loans generally offer more favorable rates. As long as the loan amount and specified conditions are met, the annual interest rate can be as low as 2% or below. Of course, to qualify for an unsecured loan with an annual rate as low as 2%, the borrower must have an excellent financial standing, income level, and credit history.
Using a reasonable Annual Percentage Rate (APR) of 5% and a repayment period of 36 months, the monthly repayments and total interest payments for large loans ranging from HK$500,000 to HK$2,000,000 are as follows:
| Loan Size | Monthly Repayment (HK$) | Total Interest Paid (HK$) |
|---|---|---|
| HK$500,000 | 14,985.45 | 39,476.15 |
| HK$600,000 | 17,982.54 | 47,371.38 |
| HK$700,000 | 20,979.63 | 55,266.61 |
| HK$800,000 | 23,976.72 | 63,161.84 |
| HK$900,000 | 26,973.81 | 71,057.07 |
| HK$1,000,000 | 29,970.90 | 78,952.30 |
| HK$1,500,000 | 44,956.35 | 118,428.44 |
| HK$2,000,000 | 59,941.79 | 157,904.59 |
Loan Size
In the current market, mainstream personal loans offer a wide range of loan amounts, starting as low as HK$2,000 and going up to approximately HK$3,000,000. Banks also consider the borrower’s monthly income, with the most common loan limit being around 12 times the monthly salary.
In fact, many personal loan products offer high flexibility in loan amounts. For example, Aistar Bank’s personal loan offers loan amounts ranging from HK$2,000 to HK$1,000,000, effectively catering to both small and large loan needs. Other products, such as Citi Speedy Cash, can go up to HK$3,500,000, and DBS Personal Instalment Loan can approve amounts above HK$1,500,000.
Required Documents and Approval Time for Large Loans
When applying for a personal loan, most lending institutions require the submission of identification documents and proof of address. Whether income proof is needed depends on the product features and the specifics of the application.
Generally, if the loan amount is HK$100,000 to HK$150,000 or more, banks or money lenders usually require applicants to provide formal income records to demonstrate their ability to repay. To manage risk, banks may request additional supporting documents for large loan applications, and the approval process may take longer.
On the other hand, institutions that focus on providing small loans may not ask for income proof or check the borrower’s credit report, which simplifies the loan process. For instance, the Grantit’s Non-TU and Express Personal Loan is a popular option for small loan needs in the market, with a loan limit of HK$80,000.
How to Increase Approval Chances for Large Amount Personal Loans
If you’re looking to secure a large amount personal loan, consider the following tips to enhance your approval prospects:
High-Income Earners Can Borrow More
The maximum loan limit for personal loans from banks typically depends on the specific product and is often calculated based on a multiple of your monthly salary, using the lower figure as the basis. For example, Airstar Bank’s Personal Loan terms state that the “loan amount can be up to 12 times your monthly salary or HK$1,000,000 (whichever is lower). In other words, the higher your monthly salary, the larger the loan amount you can borrow. For instance:
Income Verification Documents Help
Banks often only require proof of one month’s income for individuals with stable and fixed incomes. However, for those with variable or non-fixed incomes, banks may request proof of income for three months or more. Ensuring that you have the necessary income documentation readily available can streamline the approval process.
Higher Loan Limits for Debt Consolidation Loans
If your goal in borrowing is to repay one or more existing credit card debts or loans, consider opting for a balance transfer loan (also known as a debt consolidation loan). This approach has the advantage of allowing you to manage your debts in a centralized manner and often reducing the overall interest payments.
Balance transfer loans generally offer higher limits, reaching up to 21 times your monthly salary, significantly higher than the typical personal loan limit of around 12 times your monthly salary. Additionally, most banks only allow customers to use balance transfer loans to repay existing debts. However, some banks may permit customers to withdraw small cash for other purposes.
Larger Loan Amounts for Longer Repayment Terms
When banks assess loan applications, they consider the borrower’s monthly repayment capacity. Opting for a more extended repayment period can help reduce the monthly repayment amount, thereby increasing the total loan amount you can borrow.
For example, tax loans are attractive due to their lower annual interest rates, but they typically have a loan limit of around 12 times your monthly salary and a maximum repayment period of 24 months. In contrast, standard personal loans offer longer repayment terms, such as up to 60 months, and higher loan limits. Therefore, if you require a substantial loan amount, a standard personal loan better meets your needs than a tax loan.
Good Credit History Increases Approval Chances
TransUnion and Ping An OneConnect Credit are the two credit reporting agencies in Hong Kong that provide personal credit reports. These reports record applications for credit cards and loans and any missed or late payments.
For instance, TransUnion assigns credit scores from A to J. Late repayments, multiple credit card applications within a short period, and other negative behaviors can lower your score, while consistently making on-time payments can improve it. Maintaining a good credit history makes getting approved for large personal loans easier. Therefore, developing good repayment habits and effectively managing your credit cards is essential.
Carefully Consider Needs and Risks Before Borrowing a Large Loan
Taking out a large personal loan of HK$500,000, HK$1,000,000, or more inherently involves higher financial risks. Poor management of such loans can negatively impact your financial health.
Key Risks of Large Loans:
- High Repayment Pressure: Large loans come with higher monthly repayments. If your income becomes unstable or unexpected expenses arise, you may struggle to make timely repayments.
- Financial Stability: Failure to manage large loan repayments effectively can jeopardize your financial stability and overall health.
Recommendations Before Borrowing:
- Assess Your Needs: Ensure that the loan amount you are seeking is necessary and justifiable based on your financial situation.
- Evaluate Repayment Capacity: Carefully evaluate your ability to manage and repay the loan without compromising your financial stability.
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To borrow or not to borrow? Borrow only if you can repay!
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