Rumors and different opinions about the foreigners getting consumer loans from Georgian banks circling around. Some people say it is nearly impossible, others – that getting a loan is an easy-breezy process.
Let’s find out.
Until 2019, obtaining a consumer loan was quite realistic. The foreigner had to confirm his residence in the country (proof of address), as well as the prove of income in Georgia. In some cases, an applicant did not even have to have residence permit. Situation has changed in January 2019. Nowadays the regulations of the National Bank require Georgian banks and microfinance organizations to carefully analyze the solvency of individuals in order to service all the obligations that an individual has.
So, the mandatory conditions for obtaining a consumer loan are:
1. Confirmation of official income.
An extract from the bank confirming your receipt of salary will be the proof of income. If you have been receiving a salary only for a few months, the Bank may ask for an employment contract, as bank needs to be sure of the stability of your regular income for the future. If you intend to take a loan from the same Bank, to which your salary is credited, a certificate is not needed. The bank employees will see your income themselves.
* Georgian National Bank has approved a list of professions for self-employed people, such as dentists, hairdressers/stylist/make-up artists, entertainers, artists and musicians, programmers, taxi drivers, nannies, photographers, videographers, interpreters, lawyers, auto mechanics, tutors, couriers. For such group of lenders, a loan threshold has been set at GEL 6,000, and special lending guidelines have been developed.
2. A sufficient level of net income after paying income tax and mandatory payment to a pension fund.
* If a person who wants to take a loan does not have a sufficient level of income, then a surety, who is a close family member living with the borrower. In that case Bank will take into account the consolidated income of both people while issuing a loan and determining its amount.
** If there are any doubts about borrower’s solvency or other factors (for example, age, term of the employment contract), Bank may require a surety for the transaction. A surety can be any individual with an officially confirmed income.
3. The requirements for income and the maximum loan amount for individualsestablished by the National Bank are as follows:
|Monthly NET income in GEL||Mandatory payments to average monthly income ratio, %||Mandatory payments to average monthly income ratio (in case neder’s income is in foreign currency, and loan is in GEL, %|
|From 200 to 1 000||20 – 25||25 – 35|
|from 1 000 to 2 000||20 – 25||35 – 45|
|from 2 000 to 4 000||25 – 30||45 – 55|
|More than 4 000||30 – 35||50 – 60|
Difference between all loan payments and NET average monthly income cannot be less than a minimum monthly wage (192,90 GEL as of October 2019).
You may get a consumer loan secured by real estate (not to be confused with mortgage loan) if the following conditions and ratio are respected:
- If you apply for a loan in GEL, the maximum loan amount cannot exceed 85% market value of the collateral. (For example, if the Bank estimated a market value of the real estate being used as a collateral at 100 000 GEL, then the loan sum will not exceed 85 000 GEL)
- If you apply for a loan in foreign currency, the maximum loan amount cannot exceed 70% market value of the collateral. (For example, if the Bank estimated a market value of the real estate being used as a collateral at 100 000 USD, then the loan sum will not exceed 70 000 USD)
New regulation has set limits to the maximum loan period depending on the type of loan program:
- Mortgage loans – cannot be approved for a period exceeding 15 years;
- Consumer loans secured by property – maximum 10 years;
- Car loans – not exceeding 10 years;
- Other loans, including consumer without collateral – maximum 4 years.
You may get a loan in Georgian lari or in foreign currency, but at the same time, the sum of a foreign currency loan cannot be less than the amount equivalent to GEL 200,000.