As migrant workers, there are situations where we find ourselves needing to borrow money. Accidents, calamities, a family emergency back home — these are some of the reasons why we consider taking out a loan.
However, before we sign that loan application, we should consider our steps carefully. Is the lending company legit? Do I understand the terms? Can I actually afford to repay this loan, or will it lead to greater debt? Borrowing money may be necessary, but it’s important to do it wisely.
Check and Verify the Lender
In Hong Kong, just like in other cities, you can get a loan from banks and lending companies. Getting a loan from a bank usually involves more requirements, so most migrant workers borrow from lending companies.
In any case, be sure to check the legitimacy of the company. Does the company have a money lender’s license? Is the interest rate within the limit specified under the Money Lenders Ordinance? Keep in mind that lending money at an interest rate that exceeds 48 percent per annum is against the law, and anyone who does it is liable to prosecution.
Likewise, if you were hired through an agency, remember that the commission should only be up to 10 percent of your first month’s salary. If the agency charges more, or compels you to borrow money to pay fees, report the matter to authorities because these are illegal practices.
Beware of Scams
In this day and age, different type of scams abound; from love scams with “boyfriends” or “girlfriends” suddenly needing money, to investment scams promising returns that sound too good to be true.
Similarly, be wary of loans that offer “fast and easy approval” or “no credit checks,” only to surprise you with hidden costs and high interest rates. To avoid falling prey to scams and loan sharks, always be vigilant, avoid revealing personal details, and keep your personal documents safe.
Understand Loan Terms
Legitimate loans include official documents stating the terms, such as the repayment period, interest rate, penalties, and so on. Before signing anything, make sure that you understand everything. Do not sign any agreement or document that you do not understand fully.
Inform Your Employer
Some loans may require information about your employer, such as their name, address, or contact details. If this is the case, be sure to inform your employer, and ask for their permission to use their data.
At all times, be transparent with your employer regarding your financial concerns. Since they are more familiar with financial services in Hong Kong, they can give you advice on loans and money matters.
Avoid Being a Guarantor
Some lending companies require “guarantors” who can help repay a debt, in case the borrower is unable to pay. As much as possible, avoid becoming a guarantor for others, as this could lead to financial problems.
Make Saving a Habit
Although you might need to get a loan occasionally, don’t forget to save. Set aside a portion of your earnings every month, preferably into a bank account so you can monitor savings easily. Little by little, you can build an emergency fund, and eventually, save for your retirement.
Prioritize Yourself
Finally, make yourself a priority. Sending money to your family is a noble thing, but be sure to take care of yourself, too. You don’t have to be the only one carrying financial obligations. Talk to your family about sticking to a budget, and how everyone can contribute to household expenses.
By heeding these tips, you can be in a better position financially, and learn how to manage loans safely and wisely. For more advice on borrowing money, read this article on the pros and cons of getting a loan.
Disclaimer: This article is presented for general information purposes only. For more details about loans, and the city’s laws on money lending, read about the Money Lenders Ordinance on the Hong Kong e-Legislation website.