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Understand debt wisely
18 Jun 2025
While debt is usually frowned on, it can also be used wisely in order to manage finance. Going into a loan for a home, car, business and education might not be a bad thing if you don’t overextend yourself and the cost of borrowing isn’t excessive. Fidelity Global Sentiment Survey1 reveals that paying off debt is a long-term financial goal of 70% of Hongkongers, with 28% of respondents indicating that they have saved less in the past six months due to paying down more debt.
It is important to realize how to prioritise debts and what is essential as not all the debts are equal. Here’s what you need to know.
1. Priority Debt
Certain debts carry heavier sanctions, so you should make these your priority. At the top of the list are taxes. If you fail to pay, you will be deemed to be in default. Additional charges representing 10% of the unpaid amount will be imposed and the Inland Revenue Department can also apply to the District Court to institute civil jurisdiction action against you because of the overdue tax. The Department can also apply execution orders to take away your movable property, and possibly pursue bankruptcy or liquidation proceedings.
2. Secured Debt
Secured debt is money that is secured against collateral - so things like your home or your car. This means that if you stop your repayments, you face losing the goods themselves. In the case of a mortgage, a bank can force you to sell your house. In the case of a car loan, the lender can take your car. Therefore, these debts are number two on the list of priorities when it comes to keeping up with repayments.
Because the secured loans are backed by collateral, they often offer a lower interest rate than unsecured loans.
3. Unsecured Debt
Unsecured debts are riskier for lenders, as they have no certain way of getting their money back. That is why you’ll pay a higher interest rate for the privilege of borrowing money.
Credit cards are a common form of unsecured debt. Therefore, they often come with a higher interest rate and ideally should be paid in full and on time each month. If you fail to do so, you will typically pay up to 30% or more annual interest rate on the money you borrow.
4. Student Debt
The Working Family and Student Financial Assistance Agency is a Hong Kong governmental organisation that provides loans for students. If you are eligible to apply for loans, you can apply up to around HK$30,000 to HK$50,000 for each year of study in the University or an approved postsecondary programme, at a low interest rate of 1 per cent per year only.
If you fail to repay two or more consecutive quarterly instalments without the loan repayment deferment approval, you will be considered at default. You may also need to pay surcharges and overdue-interest. In some serious cases, the agency may take legal action to recover the full amount of the outstanding loans.
1 The sample consisted of 37,000 respondents with the following qualifying conditions: aged 20-75, employed full-time or part-time and had a minimum household income of: Australia: AUD $45,000 annually; Brazil: BRL $1,501 monthly; Canada: CAD $30,000 annually; China: CNY ¥5,000 monthly ;Denmark: DKK Kr.100,000 annually; France: EUR €20,000 annually; Germany: EUR €20,000 annually; Hong Kong: HKD $15,000 monthly; India: INR ₹55,001 annually; Republic of Ireland: EUR €20,000 annually; Italy: EUR €15,000 annually; Japan: JPY ¥1.5m annually; Mexico: MXN $4,500 monthly; Netherlands: EUR €20,000 annually; Saudi Arabia: SAR ر.س.4,000 monthly; Singapore: SGD $2,000 monthly; South Korea: KRW ₩1.0m monthly; Spain: EUR €15,000 annually; Sweden: SEK kr200,000 annually; Switzerland: CHF ₣20,000 annually; United Kingdom: GBP £10,000 annually; United Arab Emirates: AED دإ. 5,000 monthly; United States: USD $20,000 annually; New markets surveyed in 2024: Argentina: ARS $3,000,001 annually; Chile: 3,000,001 CLP annually; Colombia: COP $7,000,001 annually; Kuwait: KWD د.ك 6,000 annually; Nigeria: NGN ₦1,000,000 NGN annually; Philippines: PHP ₱10,001 monthly; Poland: PLN zł20,000 PLN annually; South Africa: ZAR R20,000 annually; Thailand: 60,000 baht annually; Vietnam: VND ₫24,000,000 VND annually; Taiwan: TWD NT$300,000 annually.
The data collection, research and analysis for the above markets was completed in partnership with Opinium, a strategic insight agency. Data collection took place between June and September 2024. Reporting and analysis took place between August and October 2024
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