Foreign nationals vs loans

It’s true that foreign nationals often struggle with issues such as language barriers, unemployment, xenophobia, and accessing or understanding financial support services.

Along with this, there are many misconceptions about what foreigners are eligible for, and loans are one such thing.

We find out whether a foreign national can take out a loan in South Africa, and if so, the process for doing this.

READ MORE: Is good debt a good reason to take out a personal loan?

How can banks interact with foreign nationals?

It’s important to note that financial institutions must treat temporary residents of South Africa in the same way as they would any other customer.

A spokesperson at Absa says, “Knowing our customers and understanding their risk profile, regardless of nationality, is an essential aspect of our business.”

According to the South African Reserve Bank (SARB), any foreign national is eligible for a range of banking products, provided they complete a foreign national declaration, as prescribed by SARB’s rules and regulations.

According to First National Bank (FNB), to receive a loan, a foreign national must:

• Be between the ages of 18 and 64 years
• Be a permanent SA resident and have a 13-digit ID document
• Have a valid residency permit
• Have a valid work permit
• Have proof of residence
• Be permanently employed or self-employed
• Have a salary paid directly into their bank account

READ MORE: Scared to get a personal loan? Find out the facts first

Consideration is also given to the customer’s creditworthiness and overall risk profile. According to the Absa spokesperson, several factors come into play regarding the level of borrowing risk.

These include the following.

• Credit history is used to determine customer creditworthiness. This is a requirement for all customers, including South African citizens.
• For a foreign national, the term of residence in South Africa often results in the repayment period being shortened, which can result in higher repayment amounts, and/or a higher initial deposit. This is industry-wide and is not limited to Absa.
• Renewal of residency permits is not guaranteed for foreign nationals, which potentially impacts the ability of the consumer to retain employment and service their debt.
• Regulatory requirements such as SARB approval, FICA, exchange control requirements, anti-money laundering, and proof of source of funds, all bear on borrowing eligibility.

While the above outlines the broader criteria for loan qualification, there are more specific requirements depending on the type of loan you are after. The Absa spokesperson provides the following breakdown.

Home Loans

For a home loan, the following supporting documents are required.

• Passport
• Employment contract
• Work permit
• A fully completed and signed copy of an offer to purchase (i.e., a document of intent to purchase a property)
• Proof of income (three months for full-time employment or six months if it includes overtime/commission)
• Marriage certificate. There is no requirement to provide a copy of a marriage or divorce certificate at the point of application. If the surname in the identity document differs from the surname on the application, these documents must be obtained and verified by an attorney. Note that for non-residents and temporary residents, a marriage certificate will be required

Vehicle Finance

The term of financing should not exceed the period of the current work permit, if applicable. For example, if a client’s work permit expires in three years, they can only be financed for up to three years. The following supporting documents are required.

• Passport
• Employment contract
• Work permit
• Offer to purchase
• Proof of income

Credit cards

The following supporting documents are required.

• Passport
• Work permit for a minimum of six months
• Proof of address
• Proof of income (three months)

Personal Loans

The below applies to temporary residents, that is, those currently residing in SA who are not in possession of a green barcoded ID document, but who do have a temporary residence permit. These customers can only get a personal loan with a fixed term, i.e., personal loans, balance transfer loans, express loans, and study loans (no revolving loans or overdrafts).

The following supporting documents are required.

• Passport
• Work permit
• Proof of address
• Proof of income

It is important to remember that each financial institution and loan provider has its own requirements and processes. Applicants are encouraged to do their research and contact their preferred institution or provider for further information.

Are you on the look out for a personal loan? Apply for Personal Loans here and get more information