Getting A Loan In Spain As A Foreigner [2022 English Guide]

You have finally decided that you would like to settle down in Spain! You find that you might need to get financing to make your life here easier. There are a number of uses for which you can borrow money, ranging from education and minor purchases to buying bigger assets like a vehicle or even your own home. This article will tell you all you need to know about getting a loan in Spain as a foreigner or a non-resident.

Can Foreigners Get A Loan In Spain?

Spain offers some great opportunities to take out a loan for foreigners which can help you finance various aspects of your everyday life and live comfortably. For the most part, foreigners can qualify just as easily for loans as locals. There are just a few extra considerations that must be taken into account. You will need some additional documents like a copy of your passport, NIE number and a copy of your existing property deeds (in Spain and abroad). You will also need some proof of income, and should have been living in Spain for a certain period of time (for qualifying for bigger loans). The other requirements are almost always the same for locals and expats.

Types Of Loans In Spain

You can get several different types of loans in Spain depending on your need, amount and the purpose you need a loan for. The following are the most common types of loans that can be taken by individuals.

Installment Loan

This type of loan is paid back in fixed monthly installments and can be taken out for smaller purchases like electronics and furniture. You simply split the cost into parts and pay it back over time. You do not need to keep any assets as collateral since this type of loan usually applies to smaller purchases and not larger assets. This is useful as long as you are certain about the amount you need to borrow, since you won’t be able to borrow more on the same loan unless you submit an additional application.

The annual interest rate can vary a great deal, with some banks offering a range of 7.49% to 11.99%. The exact rate will depend on your internal credit score. For some banks, you might not even need to fill out an application form; provided you meet certain conditions you are eligible for the loan straight away. 

Car Loan

This is a loan taken solely for the purpose of buying a car. You pay it back over several years, and with some banks you can even choose the amount for each installment depending on your ease. The loan will usually be approved for new and slightly used cars, but not for the purchase of cars older than several years. Payments will also typically be insured against incidents like disability, unemployment and death.

Instant Loan

This is a kind of fast credit, where you can take a loan for a small amount and for a brief time period. You can apply for it if, say, you face a sudden unexpected expense and your salary has not come in yet. The amount and repayment periods are fixed, and due to the quick nature of the entire process, you will have to pay a higher interest rate than for other types of loans. An instant loan will not need any collateral and the decision for whether or not you qualify will be quicker than other types of loans.

Mortgage

A mortgage is a kind of loan which is taken out to facilitate the purchase of real estate like a house, shop or a piece of land. The total duration of the repayment period can range from 15 to 30 years usually. The rate of interest depends on the contract you sign and may be fixed, variable or a combination of the two.

Overdraft Credit

This is when your bank or financial institution lends you money if your current account has insufficient funds. Basically, you are borrowing a certain amount from the bank. You will be charged interest as on any other loan and there is also a fee for every overdraft you make. This is usually for the short-term and for emergencies only. You can even arrange an overdraft beforehand where you mutually decide with the bank about the limit you can overdraw. An unarranged overdraft on the other hand would be when you spend more than you have in your account and have not agreed upon a limit with your bank yet. An unarranged or unauthorized overdraft will also typically be more expensive in terms of interest rates.

Debt conversion

This is a form of managing your finances whereby you take out a new loan specifically for paying off your existing debt. Essentially, you are merging multiple debts into a single loan so you don’t have to keep track of multiple payments or manage many commitments. You should also ideally be able to negotiate a lower interest rate on this. It is easier to manage one payment than multiple ones, and it might even cost you less in the long run if you are able to agree on lower interest rates.

How To Get A Loan In Spain?

Installment Loan And Car Loan

For both these kinds of loans, you might need to submit an application to the lending institution along with all the required documents. For smaller installment loans, if you have an account and are borrowing from your own bank, you might qualify straightaway without even having to go through an extensive application process. Larger loans will require more paperwork. 

If you have a regular source of income that will also work in your favor since you will be able to get better interest rates. You can use websites like HelpMyCash and Kelisto to compare the rates from different banks.

Instant Loan

Some companies will allow you to take out personal loans instantly. The interest rates charged can range from 7% to 20%, which is more than double the rate that you would pay on an average bank loan. Two of the popular companies include Cetelem or Cofidis in Spain, and are mostly used by retailers.

Mortgage

Getting a mortgage as an expat need not be complicated. If you have the required documents like identity documents, your NIE number, proof of income and any debts you have already undertaken, and a record of taxes paid, you should be good to go. Once you submit these documents, the bank will make its offer, but you should wait to hear from multiple banks to see if you can negotiate better conditions. Before finalizing your mortgage, you will also need to take out insurance for your property against fire and other natural disasters. It will take 6 to 8 weeks to finalize the mortgage, and banks will generally concede 60% to 70% of the value of the property to a foreigner.

Crowdfunded Peer-to-Peer Loans

Peer to peer loans are a more recent development, but have quickly gained popularity. Although they are still not quite mainstream, they are a great alternative to banks and other financial institutions. The website HelpMyCash can help you compare the best options available to you. These loans will typically be more expensive than a bank loan.

5 Tips for Getting A Good Loan In Spain

Prepare Your Documents And Check Your Credit Rating

In order to get a loan in Spain, you need at least the NIE (Foreigners’ Identification Number) and a Spanish bank account. These are the minimum requirements, but a lot of the times there will be additional documentary requirements like proof of residence depending on the kind of loan you are applying for and the institution that is giving you the loan.

If you have already been residing in Spain for some time, your creditworthiness will also come into play. Your credit rating determines your likelihood of paying back the debt on time depending on your history in such cases. You should take a look at the details the Bank of Spain has on record about your finances. Depending on those, a bank might offer you a different rate than the one it advertises.

Choose The Kind Of Loan You Want

You will need to research about the types of loans that are available to you. You can always take out a generic installments loan, but if you have a specific purpose in mind like buying an asset, you should apply for that specific category. This is because you can get cheaper interest rates for specific categories. Moreover, a car or house count towards building an asset so you don’t need collateral for those.

Take A Joint Or Shared Loan

This type of loan is when you take out a loan with another person, who is often referred to as the co-borrower. Once your application would be approved therefore, both of you would be liable to pay the debt. If you apply with someone who has a really good credit rating, you might even get favorable terms like a better rate of interest than if you were the sole borrower. A well-managed shared loan can even improve your credit rating over its life. One thing to consider is that you will have to find a lender who offers this kind of borrowing, since not everyone does.

Carefully Choose The Amount And Payback Duration

You should consider your monthly income compared to your debt before taking out a loan. This is because repayment will be a continuous expense over a long period of time and will be impacting your budget too. You should also think about the consequences of borrowing in the long run. Some kinds of loans like mortgages are 15 to 30 year commitments. Keeping in mind these considerations, you may also choose to look at payday loans, which are capped depending on how much you earn so that you cannot even borrow what you cannot afford in the first place.

Shop Around

There are a number of institutions where you can get a loan from. Choose and compare potential offers from different institutions like banks and other financial institutions or lenders. You should be comparing costs, that is, the interest rate and any other fees associated with the loan. And if you only need to borrow a small amount for an immediate need, you might not even need to get a loan but can use a balance transfer card etc.

Helpful Spanish Vocabulary Related To Loans

Loan application – solicitud de préstamo

Loan duration – duración del préstamo

Debt – la deuda

Guarantor/cosignatory – el avalista

Interest rate – tasa de interes

Customer service – servicio al cliente

Mortgage payment – amortize prestamo

Monthly payment – la cuota mensual

Final Thoughts

Getting a loan in Spain as a foreigner is not a hard job, but it does not need to be an impulsive decision. Just be sure to research all options available to you and apply to multiple places to get the best offer. You should continue working on your creditworthiness to make your case stronger and getting favorable conditions from lending institutions. We hope this guide was a helpful point in getting you started with the process.