Can you get a loan as a nonresident in Canada?
You likely can't get a personal loan, however you may qualify for a mortgage as a nonresident.
If you’ve just arrived to Canada and are looking for ways to fund your living expenses or pay for your education, you may struggle to find financing options. Those interested in purchasing property or land, however, may find it rather easy to get a mortgage — as long as you’ve got a hefty sum to part with as a downpayment.
Learn more about your financing options as a nonresident in our guide below.
The simple answer is usually no — you will struggle to find a lender who is willing to offer a nonresident a loan. One of the most important and common eligibility requirements for a personal loan is to be a Canadian citizen or a permanent resident.
However, if you’re looking to get a mortgage as a nonresident, you may find it rather simple.
As an international student or a nonresident, you cannot apply for a Canadian student loan. These are student loans provided by the government. Additionally, you will not be eligible for a loan from a bank.
In order to apply for a loan as a student, you will need to apply for landed immigrant status. This will open more financial doors for you, allowing you to apply for a loan through a bank or even an online provider. However, applying for this status will take time and patience.
As a nonresident of Canada, getting a mortgage is not so different from the process that a Canadian resident goes through. While you’ll likely need more documentation and proof of employment, it is relatively simple to get financing for a mortgage as a nonresident. You should keep the following in mind:
- You’ll need to be in Canada to complete the mortgage closing process.
- Lenders usually let you borrow up to 80% of the value of the property as a resident, while nonresidents can usually borrow up to 65% of the value.
- You will likely need to provide third party proof of income, employment status, net worth and credit rating.
- When purchasing a house or land, you will need to provide a bigger down payment than a Canadian resident would need to provide. For a nonresident, this is usually around 35% of the value of the property, while a resident would be looking at around 20%.
On average, it takes only one week longer to close a mortgage for a nonresident than it does for a Canadian resident.
Lenders typically ask to see the following documents from nonresident mortgage applicants:
- Proof of employment verifying income
- A reference letter from your overseas bank
- A Canadian credit check
- Three months of bank statements
- Income and net worth verification
- Personal documents including a valid ID
- Your 35% (or higher) downpayment
What is a balloon loan?
A balloon loan is a loan — often a mortgage — that does not fully amortize before the end of its term. This means that while your payments are lower over the life of the loan, you will owe a large payment to pay off the balance at its end. This payment is often more than twice the loan’s average payment — sometimes thousands of dollars. You’ll need to think about whether you will have the cash on hand to pay the balloon payment when it’s due.
For many nonresidents looking to get a mortgage, it can be helpful to provide additional information in order to streamline the mortgage application process. You should consider gathering some nontraditional credit references, each showing 12 months of on-time payments. Nontraditional credit references can include:
- Your rental history
- A history of payments for such utility bills as gas, electric, water or cable TV
- Proof of any insurance payments you make (life insurance, car insurance, etc.)
What happens after I get my loan?
After you’ve completed and submitted the paperwork, you’ll have to wait to receive your money. Some lenders take only one or two business days to authorize a loan and disburse the funds, while others may take several days or even weeks.
One you receive your loan, it’s your responsibility to keep on top of your repayments. Consider these tips:
- Create a budget. A monthly budget can help you not only save for your monthly loan repayments, but it can also remind you not to overspend.
- Enroll for automatic payments. With autopay, recurring payments are deducted from your bank account and electronically sent to your lender. It’s the easiest way for you to pay off your loan while avoiding late fees. Make sure you have enough funds in your account when your monthly repayment is due or else you may face NSF (non sufficient funds) fees.
- Avoid skipping even one payment. If you think you won’t be able to make your monthly repayment, contact your lender as soon as possible. Your lender may be willing to explore ways to help you when you’re having financial difficulties.
If you find a lender who is willing to approve you for a loan as a nonresident, you may wish to consider the following types:
|Short-term loan||With repayment terms of a few weeks to a few months, short-term loans are typically for smaller sums of money. These type of loans can be used for any legitimate purpose. Some let you use your car title as collateral to get a loan — these are called auto title loans.||Generally up to $1,000, with some lenders offering as much as $3,000.|
|Installment loan||With a set number of payments over a scheduled period of time, installment loans can last for a few months or more. An installment loan can be ideal if you’re trying to improve your credit history. It shows potential creditors that you can make payments responsibly.||Generally up to $5,000, sometimes higher.|
|Unsecured loan||Unsecured loans are not backed by other property you own — such as your car or equity in your home — and usually have fixed terms and interest rates. You can use this type of loan to consolidate debt or help with home improvements.||Generally up to $35,000, with some lenders offering much more for specific purposes.|
If you find a loan you are eligible for, you should keep in mind that all loans are not created equal. You’ll need to do your research and compare your options before making a final decision and applying for a loan.
Consider these factors:
- Loan terms. Shorter loan terms could end up being beneficial. You’ll increase your monthly payments, but you’ll pay a lower amount in overall interest — meaning the loan costs less.
- Monthly payments. Monthly payments with variable interest rates typically have lower monthly payments, but these loans come with other catches — such as the rate increasing over time. Evaluate what you can afford each month before signing a contract.
- APR. Don’t ignore the annual percentage rate, which reflects the interest rate, fees and other charges to establish the loan. This is seen as the true cost of the loan, so you should compare different APR’s to see which is the most competitive.
- Interest rate. One of the most important factors to consider is the interest rate. It’s not always easy to compare them, but a loan with a low interest rate may be offset with high fees. This is why it’s best to compare the APR’s of different loans.
What is a secured loan?
A secured loan is a loan that requires you to provide an asset as a guarantee — like your car or equity in your home. It protects the lender by allowing them to repossess and sell your asset to recoup its losses if you default on the loan.
With an unsecured loan, the lender believes that you can repay the loan without providing an asset. Unsecured loans tend to have higher interest rates, since they’re seen as riskier loans.