How To Get A Loan In Colombia?

How To Get A Loan In Colombia? Getting a loan for a mortgage or for other financial reasons can be quite difficult for ex-pats. However, there are some circumstances through which you can get a bank loan.

Mortgages and financing

The current mortgage rate for the property is between 15-18% per annum. This is usually a short-term loan of 5 to 15 years and is usually only given to Colombian citizens. Direct financing is not available to foreigners in Colombia.

Requirements on How to Get A Loan In Colombia

How To Get A Loan In Colombia? Although it can be difficult to get a loan as an ex-pat, some banks will grant you a loan if you meet the following conditions:

  • You already have a local bank account
  • You are married to a Colombian national
  • You have been living in Colombia for more than six months
  • You intend to buy for a living and not as a second home

How To Get A Loan In Colombia – Finance A Land Purchase In Colombia

How to get a loan in Colombia? For foreigners who want to buy land in Colombia, the financing issue needs to be addressed. In this article, we will take a closer look at the topic of real estate financing options in Colombia.

Buying a house, apartment or land is a dream for many Colombians. However, the high cost of the property relative to the income level of the residents of countries like Colombia makes it nearly impossible for most individuals or families to make such an investment. However, for foreigners who earn income in other currencies (e.g. USD, EUR, GDP, etc.), land costs in Colombia are relatively cheap. This is especially true when you look at foreclosed properties or properties whose owner is willing to finance the purchase.

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Let’s dive in and discuss the land financing options in Colombia in more detail.

How To Get A Loan In Colombia
How To Get A Loan In Colombia

· Purchase of land with a mortgage

This is one of the most common forms of financing in Colombia. Getting a mortgage in Colombia is just the process of applying for a loan. Most financial institutions in Colombia provide mortgages to eligible individuals. Keep in mind that to get a mortgage, the property itself will be used as collateral for your loan.

Likewise, your credit history is taken into account. This is nothing more than a document issued by institutions like Datacrédito and TransUnion in Colombia, revealing the financial history of the individual lending banks. Credit checks are performed to minimize the risks of lending money to unqualified persons.

Another thing to keep in mind is that you need to make a down payment on the property when you want to apply for a mortgage. The deposit is usually 30% of the asset’s value. As a general rule of thumb, this means you can get financing up to 70%.

Please note that depending on the financial institution you are applying for the credit with, there may be more or fewer requirements. Therefore, you need to analyze the interest rate offered by the bank as compared to others, the rate to be financed and the loan approval requirements as getting a mortgage loan requires prior approval from the bank.

After these steps are completed, the person starts looking for the property or land they want to buy so that the documents of that property can be presented to the bank. During this time, the Title Transfer and Release Certificate will be processed, which should not exceed 90 days. We cover title certificates in more detail in this blog post here.

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The bank, after reviewing the certificate and assessing the applicant’s financial standing, will request the inspection of an expert to appraise the property to determine its commercial value, as well as the potential risks associated with the property.

It should be noted that the average interest rate is usually around 12%, which is the interest rate charged on your annual credit.

· Securing Private Loans From Individuals To Finance A Land Deal

Another option for people who want to buy land in Colombia is to get a loan from a natural person. Due to the many requirements and obstacles often imposed by financial institutions, hiring someone who can lend you the money through a simpler process is an excellent option. This is especially true for foreigners who may have difficulty working with local banks.

Private lenders are often used in countries like Colombia because there is a very strong informal culture. Likewise, many locals will not meet the strict requirements of financial institutions and private lenders tend to charge higher interest but have less strict requirements.

It must be said, however, that many people take advantage of the immediacy with which people need money, setting interest rates well above Colombian law.

In Colombia, the highest allowed interest rate is set at 26.12% per year, this is the maximum amount that a person or financial institution can collect from someone for a loan.

If the rate at which you lend the money is higher, that operation is considered illegal. Let’s not forget that it is the financial authority of Colombia that is responsible for overseeing the financial transactions and ensuring that this rate is respected.

This is important because depending on the term of your loan and the interest rate set by the person or financial institution to which you lend the money, you can calculate how much money you will end up paying. The average loan term in Colombia ranges from 6 to 72 months, although it should be noted that there is nothing prohibiting the period from being longer or shorter than the time frame mentioned above.

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Can foreigners finance land deals?

The same financing options apply to foreigners living in Colombia. Although it should be noted that many of the options, if not all, require foreigners to have a foreign resident card. In addition, they must prove purchasing power and credit history.

Please note that the conditions may differ depending on the situation of the foreign national. For foreigners who are in the country with the status of a retiree, the foreign national (with the credit application) must submit an income statement or an income statement to demonstrate financial stability.

In case the foreigner is a self-employed person or entrepreneur, the foreigner will have to enclose the last three bank statements (probably six), as well as the Chamber of Commerce certificate showing when the company was registered.

These documents must be submitted along with the loan application to the office of the attorney’s preferred bank. In Colombia, there are banks such as the Scotiabank Colpatria, which has a complete and specialized portfolio for foreigners who want to apply for a loan from their bank.

In the case of foreigners who want to make a purchase that is financed directly by the owner, they should keep in mind that the above-mentioned usury fee applies not only to loan money but also to the financing of real estate. In addition, they must verify that the property documents of that property match who is claiming to be the owner and must also verify that the property has no issues preventing it from being sold.

Conclusion – How To Get A Loan In Colombia?

How to Get A Loan In Colombia? It can be difficult to get a loan as an ex-pat; some banks will grant you a loan if you meet the following conditions:

  1. You already have a local bank account
  2. You are married to a Colombian national
  3. You have been living in Colombia for more than six months
  4. You intend to buy for a living and not as a second home