If you aren’t native to the country, but in desperate need of a loan, there’s no need for concern because where there is demand, there is supply!

It’s a painful process trying to obtain a loan in a country without valid citizenship and foreigners are all too familiar with just how painful it truly can be.

It might be a fair assumption that after a number of years of residence in the country, one would be entitled to apply for a loan if it was required. Especially for those with valid work permits.

Let’s just stop you right there and teach you a little lesson based on the assumption – don’t ever assume anything. The unfortunate part about financial contracts is that the legal side is very stringent in its rules and regulations when It comes to foreigners seeking a loan if they are not yet a citizen. That’s left a large number of individuals struggling to get this huge burden alleviated.

It makes no sense why this would be such an impossible task. Especially, since you’re living in South Africa and you’re diligently paying your taxes just like everyone else. The problem comes in when your credit record is taken into consideration. Foreigners don’t have an existing credit record in South Africa. When lending money, a credit score for any individual is a fundamental part of the approval process. It becomes obvious then why this pivotal element can’t be overlooked.  

Microloan companies are always taking a risk when lending money, hence the reason that those who aren’t permanent citizens of the country will continue to fight this struggle.

Now that you’re aware of the reasons it’s so tough, let’s shed some light on how it is still possible! There are certain banking institutions that gladly consider loan applications from foreigners, provided that they can prove they have a full-time employment contract.

Bear in mind that even though one might be permitted to apply under a certain set of criteria, this does not guarantee loan approval. There are a number of reasons that one might not be approved and that has nothing to do with where you’re from and could have everything to do with affordability.  

How foreigners can get a good credit score in South Africa

Have you just touched down in the country, moved in and started your new job? Then the first thing you should do is approach a bank that you’re keen on joining and open an account in the country. It’s likely that you’ll need some advice on who offers the best rates and has excellent customer service and other relevant criteria that matter to your decision.

Once you’ve got that covered, the rest is fairly simple! You’ll have to either apply for a credit card, open a retail account, take out a home loan, purchase a vehicle, or all of the above perhaps if you’ve just moved to a foreign country. Either way, they’re likely to be lines of credit and will, therefore, form part of your newly established credit record.  

The following process is pretty uneventful, in that you just go about your daily life making your monthly payments as and when you’re required to. Do this all the while ensuring that you are never late or short with your payments! This will quickly flag you as a good payer.

The longer you keep paying on these accounts, the higher your chances are of obtaining a decent amount approved on a loan application. It’s important to remember that the loan would need to be settled before you left the country, if you planned on doing so.

All outstanding credit on a foreigners’ name is strictly governed by SARB’s (South African Reserve Bank) exchange-control policy. This policy states that if you are an individual in possession of a valid working permit in South Africa, you have the right to apply for a personal loan. That means that even though it’ll give you early grey hairs, you’ll still be able to afford the expensive hair treatments with your new loan funds.  

Understanding SA’s banks on foreign policy

Each banking institution in South Africa has their own policy. Even though the differences are slight, it would still behove you to know the differences between them all. The reason being that you need to source the one that best speaks to your lifestyle and your needs.

When foreigners apply for a loan in the instance where there is no valid citizenship, the banks deal with this in the following ways:

Standard Bank: The client should have an existing account with us in order to borrow money from our bank. The borrower must have a valid working permit with proof of an employment contract. He or she would have to settle the loan before his last day in the country.

Nedbank: We abide by the rules and regulations of the SARB exchange policy. Provided the borrower settles the loan in full prior to leaving the country, and can prove that he or she has an existing work permit issued be the dept. of Home Affairs, then they are welcome to borrow money from us.

FNB: FNB chooses not to lend money to any individuals that are not in possession of a valid South African ID number as it is too much of a risk.

From that short breakdown, it’s easy to tell that every provider is different and there’s no legal reason for them to comply with anything should they choose not to. FNB doesn’t seem to favour it, but most other banks will allow you to follow the steps and enter into a loan application with a clear plan on how you’ll repay the loan.