At first glance it may look like the title here must be a joke. Many new expats, and even some seasoned veterans, think that getting bank loans from foreign banks is just about impossible if one is a foreigner.
There’s no doubt that in turbulent times it can be tricky, and perhaps even more so for expats. Nevertheless, it is a myth that it can’t be done.
One of the reasons any bank exists, whether at home or abroad, is to provide its customers with loans under certain circumstances. The basic types of loan do not vary much in anywhere in the world – broadly speaking they are categorised as personal or business, asset based (e.g. car purchase) or not, and so on. Banks want to sell these loans and make money on them.Now it is a fact that foreign banks overseas operate under different assumptions, rules and sometimes laws, to the banks you know and love at home. These differences vary from one country to another, and even sometimes from one state in a country to another. This may work in your favour sometimes via perhaps lower interest rates than you’re used to, or against you as in lower lending limits.
The point is, as an expat or potential expat you need to check carefully the laws and approaches applicable to the country you’re interested in – what we offer here can only be a rough generalised guide.
Getting the loan
Mortgages and commercial loans such as business start-up are outside of the scope of this article and we’ll concentrate on personal loans such as a car or home improvements.
The really good news is that in many countries the basic principles of application and decision-making are exactly the same as you’re already familiar with. The banks in most countries don’t discriminate against expatriates and welcome the application.
Keep in mind though that a bank is a bank wherever it is. They are going to have a fairly hard look at
– The purpose of the loan
– How much you want to borrow
– How much money you have saved up or have access to (they may or may not take into account monies you have in accounts ‘back home’)
– How much regular income you have plus your outgoings – to see if you can afford the repayments
– If it all goes horribly wrong, will you have an asset such as a car that can be sold or is the money going ‘up in smoke’ via a holiday or some such.
There is nothing to this stage that varies much from banking you’ve seen before.
In any country, loan requests that are perceived by a bank to be plainly daft will get treated roughly.
Getting the loan – where it’s different
This is often the tricky part for expats coming from the UK and it can cause surprise! Some of the things you can expect to see include:
– Many foreign banks will also look long and hard at ‘you’ and for anything other than small amounts you should expect the need for a meeting. They’ll be forming an impression as to whether you’re responsible and trustworthy. Loan applications based exclusively on ticking boxes on a form are rare overseas. Anticipate the need to appear grateful and be prepared to ‘sell yourself’ hard to secure your loan.
– Most will not react well to what some foreign bankers call “crackpot expat schemes”. If you need a loan to start a snail farm then ask for a commercial discussion – don’t ask for a personal loan then say you plan to use it for commercial purposes.
– In many countries you’ll need to show that you are paying a fairly chunky amount of the purchase yourself. If you want 10,000 to build a new garage, you may find the bank will lend only say 7 or 8,000 of that amount and expect you to fund the rest.
– Many banks overseas won’t hand out loans to just any expatriate who has walked in off the street. They will always give preference to people who have banked with them for a period beforehand and are proven to be trustworthy. The message here is to establish a banking relationship and work hard to maintain it. If possible, get to know your bank and manager BEFORE starting to ask them for loans and favours!
– For the most part, overseas banks don’t have a great degree of freedom to move on loan amounts. They are very table and rule based and if they work out the most you can borrow is say 5,000 then it is unlikely you’ll be able to ‘talk them up’ to 7,000.
– You can also anticipate many foreign banks staring in baffled incomprehension at requests for loans relating to debt consolidation. Many of them will just not understand how anyone, expat or native, can think that borrowing money is a way to get out of debt. It is a concept that in many countries just does not exist.
Finally, don’t necessarily expect a fast decision. Unless your loan request is clearly absurd, in which case you’ll get a very fast ‘no’, many overseas banks have heavily bureaucratic processes and you may find your request has to go through several levels of authorisation before you get it.
On the whole you should find that the basics are no different to what you’re used to. If you play the game according to local rules and expectations, and your basic request is sensible, then you should not encounter any problems in securing loans for personal reasons.