Business • Finance
Top 3 Loan Options for Non-Canadian Residents
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Starting a new life abroad can be costly. Securing flight tickets for the family is just the start of a gamut of expenses you will encounter before settling in your new home. For some, this may mean generating a pile of debts that will be difficult to get out of. If you are in the same situation, you are probably wondering if you are eligible for a loan in a foreign country. The simple answer to this is – it will be difficult, but not impossible.
A non-resident in Canada will be able to apply for different types of loans, including mortgage and auto loans. Depending on the lending institution, you may be charged higher interest rates compared to residents, but this is considered normal. Moreover, restrictions may be applied to foreigners who have only been in the country for a limited amount of time. This is because institutions are wary of people leaving Canada without paying.
Loan applications also tend to be disapproved of for non-resident borrowers who have diplomatic immunity. Since they are not subject to Canadian law, even if they do live in Canada, lending institutions will not be able to hold them accountable in the event that they fail to pay back the loan. Generally, loan applications for non-residents involve a lot of paperwork to get through. While this can be taxing, a little patience will do the trick.
In Canada, non-residents are able to apply for mortgage loans, even with no credit history. To qualify for one, you need to prepare documentation. These include your proof of income, letter of reference from your foreign bank, and down payment, among others. Lending institutions need to verify your income and net worth, so you must be ready to present your employment contract, tax returns, and payslips.
The verification process also involves a letter of reference from a bank outside of Canada. If you can provide a third-party credit profile from your home country, for instance, an international credit bureau report or banking statements covering six months, this will help. Dealing with foreign banks often entails some delays, so it is advised that you begin the pre-approval process earlier to avoid setbacks.
Canadian banks and lending institutions require a minimum of 35% down payment for non-resident borrowers. Those with stricter rules for qualifying may demand more. You must be able to show that your down payment has been in a Canadian bank at least 30 days before the closing of the purchase. Most banks will want to trace the source of your down payment for 90 days, so be prepared just in case. You should also expect a Canadian credit check.
When applying for a mortgage, non-residents are eligible for the same interest rates as residents, as long as they meet the eligibility criteria. For those who live in a country without a tax treaty with Canada, they are qualified for a fixed-rate interest rate. Even if you do not meet the mortgage eligibility requirements, you may still be able to get financing from other lenders.
Owning a car when living in Canada is advantageous as there are areas where' public transport is limited. It may be a bit challenging for non-residents to find lenders for auto financing, but it is still possible. You will need to satisfy specific documentations and legal formalities before you can apply. Most lending institutions will want to look at your credit history. If you have none, there are several ways to build a credit history in Canada.
One way is to get a co-signer. This person will act as your guarantor for your debt and will ensure that the money you borrowed will be returned. You may also apply for a joint card, where' a family member or friend with good credit will share the card with you. Another way to build credit is by taking out a loan from a bank or other lending institution, then paying it off quickly. You may also join a credit union- in your community or at work.
Most lenders are wary of granting auto loans for non-residents with short-term visas, but this should not discourage you if you are employed and in a stable financial situation. For auto loan applications, it is best if you speak with the loan officer at the bank where' your salary is credited. You may also approach a local credit union- to understand their car loan terms and see if you qualify or not.
There are certain factors that may affect how much loan a non-resident can get. First, loan duration is dependent on your visa, with terms ending about three months before the visa expires. Lenders do not consider pending visa extensions. Those with student visas, sponsored employer visas and permanent resident status tend to work out better terms with lenders. If non-residents do not have Canadian credit history, they may also pay larger down payments.
As an auto loan borrower, you need to prepare and submit certain documents. These include personal identification, employment details and proof of income. Lenders will also need your other financial details, if you have credit card debts or student loans. Once your application is accepted, you will be given a pre-approved loan amount. After this, you can go ahead and look for a car that will fall within the accepted figure.
For non-residents, personal loan options in Canada are quite limited. This is because one of the most common eligibility requirements for personal loans is to be either a Canadian citizen or a permanent resident. For many lenders, granting loans to non-residents is too risky as they can flee the country, making it impossible to collect back funds. In some cases, borrowers who got approval are those that will stay in Canada at least three more years after taking on the loan.
If you manage to find a lender willing to work with you, expect to provide different kinds of paperwork. Some of the documents required to apply for a traditional person loan for non-residents are valid visa and employment authorization form, among others. You may even need a cosigner with a good credit history who will be able to cover payments in cases of unforeseen events. This should reduce the risks for lenders .
There are two types of personal loans that a non-resident must consider – secured and unsecured loans. Secured loans use assets as collateral, in case you cannot make payments. This could be a property, a car or an investment portfolio. Meanwhile, unsecured loans do not require collaterals. Because lenders do not have assets to seize in case of default, unsecured loans are more difficult to get.