Can you get a loan as an expat? – that will be the topic of today’s article.
Before introducing this article, if you are interested in our core services which are expat financial, insurance and mortgages, you can contact me here.
The best time to consider your financial situation is when you are moving to a new country.
Banks sell loans, and regardless of whether you are a foreigner or a citizen, they want you – the client – to buy these loans. Keep this in mind to understand that getting a loan as an emigrant is possible, and it is worth considering whether this will make your life as an emigrant easier. But where to start when applying for a loan in a country whose banking system is not too familiar to you?
A personal loan can be a liberating solution if you are looking to renovate your home, make a high-value purchase, or even pay off your debts. There are other types of loans such as business and student loans or mortgages, but in this article, we will only discuss personal loans for expats. So, if you are an expat who never thought it was possible to get a loan in the host country, then this article is for you.
Whether you are an expat or a permanent resident, no bank will grant you a loan before asking about the purpose of the loan, the amount you want to borrow, and your monthly income and expenses. As an expat borrower, you should be aware that money you may have or receive from banks in your home country will most likely not be accounted for by the lending bank in your host country.
Generally speaking, personal loans do not require collateral (eg property, vehicle, other type of ownership) to act as a safety net in case you start missing loan payments. Personal loans, unlike mortgages, are usually unsecured. However, if you are late on your payments, there are still repercussions such as additional fees, litigation, and even loan default, which means your credit rating will be severely affected in the coming years.
You may be thinking this is not an interview and you are correct. But this is undoubtedly one of those life situations where you have to sell yourself convincingly in order to close the deal. The bank is interested in you being a responsible and reliable borrower. When attending a banker interview, make sure you are fully aware of the culture and business etiquette of the host country to avoid accidentally insulting your creditor or being judged as rude or arrogant. Plus, your clothes and body language can tell a lot about you, so keep it formal and confident.
It is a good and more convenient practice to apply for a loan from a bank where you have already worked and where you are welcomed as a reliable client. Once you have decided that you want to apply for a loan, do not come to the bank one day and ask for it. Instead, work for several months to establish good banking relationships and rapport with staff and managers. In the end, they are the ones who will decide on your loan.
To understand how this process is being done, let’s review a few examples of different countries and how they give loans to the expats.
Getting a loan in the US
The United States is a land of opportunity. Millions of people move to the US with an intention to build a better life. But there are obstacles to being a foreigner in the United States. You cannot work without a permit, you can only stay there as long as the visa is valid, and do you even have access to loans or other credits?
Who are considered foreigners in America?
There are three main categories of people who are allowed to enter America:
- Permanent resident
- Visa holders
US citizens are allowed to work and vote. They can apply for a Social Security number and are eligible for a US passport. Permanent residents own green cards. They are allowed to stay and work in the United States, but they cannot vote.
Visa holders are commonly referred to as foreigners. Some of them are eligible to work, but all are allowed to stay in the US under the terms of their visas. Visa holders can only stay in the United States with a valid visa.
So, if you are not a US citizen, can you get a US loan, or what if you are an H1B visa holder. And if so, what qualifies you for a foreign loan in the United States?
The good news is that there are lenders in the US that provide loans to visa holders. Not all lenders are willing to provide loans to foreigners, but there are still some who do. These loans are not only for foreigners, but foreigners can apply for them if they meet all the criteria.
Why banks in the USA do not like to lend to foreigners?
Lenders take risks by offering loans to people. There is a possibility that someone will not be able to repay the loan. For foreigners, this risk is even higher due to various factors. Here are four main reasons why banks do not provide loans to foreigners:
Lack of credit history
Your credit history is a record of your financial transactions. Foreigners often do not spend enough time in the US to have adequate credit. Then banks cannot judge your ability to manage credit. Instead of taking risks, they refuse to lend money to foreigners.
Most loans have long terms. These loan conditions often go beyond the foreigner’s visa period. Foreigners can also simply decide to leave and return home at any time. Banks fear that foreigners will leave the US before the loan is repaid, which will prevent them from getting their money back.
Foreigners can’t get cosigners
Banks will ask foreigners to attract loan seekers. The co-ruler must be a permanent resident of the United States with an adequate credit rating. Many foreigners do not know people in the United States who could help by being their co-authors.
Foreigners have no documentation
Obtaining a loan requires several legal processes that require valid documentation. Some foreigners do not have the required documents and therefore cannot apply for bank loans.
Getting a loan in the UK
For people living outside the UK looking for a UK loan, it has become increasingly difficult to obtain a loan in recent years as UK lenders continue to tighten their loan requirements. Ultimately, this means that obtaining a loan loan to buy property in the UK often requires the help of a specialist.
Some UK banks have even changed their rules and no longer offer loans directly to expatriates and non-residents, while other international lenders have made UK loans available.
When looking for a UK loan while living abroad, there are a number of key factors that will affect your eligibility to apply for an expat loan.
In any case, before deciding on any particular UK loan, it is highly recommended to speak to an independent loan consultant who can understand your personal requirements before researching the entire expat loan/mortgage market. Very often they will have access to products that consumers do not know about and therefore may offer you a wider range of options.
The amount that anyone can borrow on a UK loan, whether they reside in the UK or overseas, will primarily depend on two factors. The size of the deposit (discussed below as the ratio of the loan to the value) and the total proven income.
Most UK lenders offer a maximum loan of 3.5 to 6 times the applicant’s total annual income. However, the actual amount will also include additional factors, including employment history, other debts, number of applications, number of financial dependents, and total finance costs.
If someone has applied for a loan to buy for the purpose of renting out, the expected rental income will also be taken into account when determining the maximum value of the loan.
All mortgage lenders, whether non-residents or residents, will determine an individual’s eligibility for a mortgage on a risk basis. One of the main factors behind the 2008 banking crisis was that lenders were open to lending to people they perceived as risky (for example, people who borrowed excessively against their income, which meant they were unable to pay off their mortgages).
Unfortunately for non-residents, additional factors such as currency fluctuations, various economic factors affecting employment, and the lack of international credit ratings mean that the risk is naturally higher for a borrower residing abroad. This means that it is more difficult for the average expat to obtain a UK mortgage and may take more time and information to make sure the process can be completed.
This should not in itself act as a deterrent, but simply be perceived as part of the process for expats. This usually means that expats will pay higher interest and fees, but expats may also be more limited on the amount they can borrow and may need to speak with specialist lenders and expat brokers.
Factors that may increase your chances of getting a UK loan as an expat
If you are an expatriate or non-UK resident, you can successfully apply for a UK mortgage. Below is a short list of factors that can increase your chances of successfully applying for an expat mortgage:
Proof of earnings
As with all mortgages, this is much easier for self-employed people than for self-employed people, simply because it is easier to provide payrolls for a specific period of time to prove income.
Self-employed people are likely to be required to provide multi-year invoices drawn up by an internationally recognized accountant.
While some banks require income to be deposited into a UK bank account, this is not necessary, although it provides a much easier way to prove income.
Credit history and ratings of expats
While it is not necessary for foreigners to have a UK credit history to apply for a mortgage, having a strong UK credit history can help in finding the best rates and mortgage deals.
Obviously, the longer you live abroad, the less likely your UK credit rating will help you as there are no international rating agencies.
Getting a loan in Qatar
Foreigners have been allowed to buy property in Qatar for the past 15 years, although growth has been slow in the mortgage market. However, this could be changed if preferential residency rules are offered to foreign buyers purchasing homes in the country.
Qatar’s central bank sets strict laws on mortgage lending, with foreign borrowers being allowed to spend a maximum of 50% of their monthly salary on mortgage payments; and mortgage terms over 20 years are outlawed.
In addition, expats can only borrow up to 70% of the value of the property; this means that you will need a sizable deposit to climb the career ladder in Qatar.
Foreigners can apply for a mortgage in Qatar at an international or local bank, however, the possibilities of the first category may be limited.
This is because new laws introduced in 2016 mean that European lenders must now take into account the possibility of currency fluctuations when evaluating applications.
This change has resulted in some Qatari banks ditching borrowers in countries with less common currencies.
Types of mortgages in Qatar
In Qatar, you can get both fixed and variable rate mortgages. Some transactions will charge a fixed amount for the entire loan term, while others offer a lower starting rate for a specified number of months or years; after which the rate will become variable. For example, Commercial Bank of Qatar offers a reduced rate for the first 18 months on some of its mortgages; after which the variable rate is applied until the end of the term.
How to apply for a mortgage in Qatar?
You can usually get a mortgage agreement before making an offer to buy a property. This will let you know how much you can borrow before starting your property search.
The exact amount you can borrow will not be confirmed until the bank evaluates the value of the specific property you are trying to buy.
Before issuing mortgages, banks usually require the following:
- proof of income
- bank statements for the last six months (if you work with another provider)
- passport and valid residence permit
- property appraisal report
- copy of the certificate of ownership of the property
- proof of building insurance
- declaration from the developer (if applicable)
Lenders often require you to transfer your bank account to them before offering you a mortgage. Mortgage applications are usually processed within seven days from the date the documents are received at the bank.
Getting a loan in Germany
Foreign nationals can get a loan in Germany if they meet the following criteria:
- Be a resident of Germany
- Have a checking account with a German bank
- Have a steady income
Germany is a land of opportunity, but as a foreigner you may face some obstacles in life. Usually you cannot work without a permit and can only stay there as long as your visa is valid. Fortunately, Germany is not racist and does not discriminate against people based on their nationality alone. According to the law, foreigners have the right to receive a loan in the country; on the bus, this will largely depend on the bank and your life situation.
In general, it is more difficult for a foreigner to obtain a loan than for a German citizen. EU citizens have a better chance than non-EU citizens. Banks just don’t want to take risks.
Ultimately, banks want to see that you stay in Germany for a long time, especially if you are thinking about getting a loan for a long period of time. EU citizens and PR holders have higher success rates when applying for a loan in Germany. However, all foreigners can obtain a loan in Germany, subject to the fulfillment of basic requirements, such as:
- Residence in Germany
- Regular income
How you can easily get a loan in Germany?
To increase your chances of getting a loan in Germany as a foreigner, be sure to only apply for loans with a repayment period that fully matches the duration of your residence permit. If you are looking to get a mortgage, it is best to wait until you have a settlement permit (PR).
- Apply for a loan for the maximum duration of your residence permit in Germany.
- Provide income and financial proof – you can support yourself and you can get your money back.
- Try to apply for a smaller amount in online banks – there are fewer requirements and the process of issuing a loan is easier.
Standard requirements of traditional banks when applying for a loan in Germany:
- You are over 18 years old
- You take out a loan for yourself
- You have a residence in Germany
- You have a bank account in Germany.
- You have a positive SCHUFA (credit rating)
- You have a steady income
Get a loan in Netherlands
A personal loan can be a great way to create additional financial opportunities. You can use a consumer loan for many purposes, for example, to renovate a house, buy household appliances or a car. Whether you want to know if you can save on your current personal loan, whether you want to apply for a loan, or just want a second opinion on interest rates, we are here to help you.
First things first, what is a personal loan? Simply put, a personal loan in the Netherlands is a type of consumer loan with monthly payments, interest and a fixed term. Most often, the loan is paid directly to you as the borrower through a lump sum payment. This is because the amount of money you have to pay on a monthly basis is negotiated in advance.
Applying for a loan
Apply for a personal loan as an expat in the Netherlands. Most lenders expect from you the following requirements:
- You have worked in the Netherlands for at least 1 year under a contract with a Dutch employer. In the case of self-employment, you need to have at least data about your company for the last 3 years.
- You have a positive credit history. (positive registration in BKR)
- If your citizenship is not European: you need a residence permit of at least the following types: I, II, III, IV, V.
If you meet the above criteria, you are ready to apply for a consumer loan.
When obtaining a loan in the Netherlands, it is very important to pay attention to the interest rate that you will have to pay. The higher the interest rate, the more expensive your loan will be. Monthly payments consist of repayment and interest payments and will be fixed throughout the entire term of the loan.
Getting a loan in the UAE
Mortgages in the United Arab Emirates are available for expat borrowers looking to buy or invest in real estate. This helpful guide explains what you need to do to climb the real estate ladder.
The United Arab Emirates is becoming an increasingly popular destination for expats, especially in business-friendly areas such as Dubai and Abu Dhabi.
Recognizing this trend, the UAE mortgage market is now well established and international and local lenders are offering home loans to expatriates. Foreign nationals residing in the UAE are eligible for mortgages and mortgages with a lease option, although their criteria differ.
Foreign buyers can get a mortgage in the United Arab Emirates, but must meet certain criteria. You need to have worked in your current job for at least six months or a year, depending on the area you are buying from and your lender’s rules.
Self-employed borrowers must run their business for at least two years. It can also be helpful to have an existing relationship with the bank as it will be familiar with your circumstances.
One of the system’s biggest quirks is that some banks only accept candidates who work for certain companies. This means that if you work for a government office, banking institution, or multinational company, you are unlikely to have a problem.
However, if your employer is less or less reputable, it may be difficult for you to get a loan from some lenders, even if you are creditworthy.
In addition, it is important to have a clean credit history when applying as lenders tend to reject candidates with poor or non-existent credit files. With this in mind, you should not apply for a mortgage until you have checked your loan file and fixed any issues.
If you’ve never had a loan, you may want to consider taking a credit card and repaying it in full each month to build up your credit history.