A sailor, despite high earnings, must be prepared for a longer and more difficult path to a loan than a typical client earning in dollars. Why is a loan for a seaman associated with so many ambiguities and the seafarer’s profession is treated somewhat differently than a traditional client’s profession?
Before you go to the bank for a mortgage or cash loan, see what the bank will check, what can decide about the amount of creditworthiness and what documents will be needed.
Why can a sailor have difficulty getting a loan?
The bank grants a loan based on an assessment of the borrower’s credibility and creditworthiness. In the case of seafarers, there are two basic, problematic issues that can determine the final assessment of the bank. The first is the average monthly income and irregular income inflows, and the second is the form of employment and currency.
Normally, the seafarer does not receive money every month, but only during the duration of the contract. For example, a sailor earns $ 10,000 a month and shifts 1 month work / 1 month rest. From these earnings in the year will receive an average monthly income of only $ 5,000. Thus, the bank may say that the average monthly income is too low and will reduce the loan amount due to insufficient creditworthiness. And if the seafarer does not meet the minimum average net income criterion, the bank will completely reject the application.
Banks may also reject a seafarer’s application on grounds of:
- frequent changes of employers,
- employment based on contracts of specified duration,
- multiple changes in income currency
- or irregular salary receipts.
Due to the nature of the borrower’s employment and the type of documents, the credit procedure itself may take longer.
What does the bank require for a sailor loan?
Taking a foreign currency mortgage requires a higher own contribution than in the case of loans in USD. In accordance with the provisions of Recommendation S IV, the minimum own contribution is 20% of the property value (10% – with low own contribution insurance). Meanwhile, in the case of foreign currency loans, this threshold is often 30 or even 40%. In addition, these types of loans provide for shorter maximum funding periods. Most often 20 or 25 years, not 35 years like zloty products.
With a cash loan for a seafarer, the bank requires a steady and documented source of income, i.e. a seaman’s book, which confirms the permanent nature of employment, as well as contracts and transfers that ensure payout stability.
What documents will I need for a loan?
Banks are required to consider a mortgage application within 21 days, but customers usually receive a response sooner. In the case of cash loans, they are informed about the credit decision a few days after submitting the application. The list of documents for a loan may differ slightly depending on the financial institution as well as the specific client.
In addition to personal documents, you must provide the bank with:
- copy of the seaman’s book;
- the last seafarer contract translated;
- personal account statement for the last 12 months confirming the receipt of remuneration;
- employment certificate.
If you apply for a mortgage, you must also submit the necessary documents regarding the property . Depending on the lender, you may need to provide additional documents and certificates. For example, you may be asked to make a statement in which your employer confirms that you keep your current salary currency for at least another 12 months.
Of course, if you apply for a loan with a co-borrower, you will also need documentation about that person, including, but not limited to, an identity document, bank statement, and documents confirming the income they earn.
A loan for a seaman with a co-borrower is a chance for a loan in USD
Earning in a foreign currency, you cannot take advantage of the USD mortgage offer. It will be different when the loan is joined by a co-borrower earning in USD. It can be any person, regardless of relationship. It is important that this is her conscious decision.
The main disadvantage of this solution is the fact that when calculating creditworthiness, the bank will convert your income into USD and equalize it with the income of the person attached to the loan application. If you earn a monthly equivalent of $ 12,000 and a potential co-borrower $ 3,000, then for the bank it will total $ 6,000. In the absence of other financial obligations, such income can provide quite good creditworthiness, but in the example shown you could borrow more by applying for a foreign currency loan yourself.
Currency conversion of a seafarer’s loan
Foreign currency loan (mortgage and cash) with a long repayment period, generates considerable risk resulting from changes in exchange rates. The safest solution is to pay the liability in the currency of your main income. The problem is that seafarers often change the contract and at the same time the currency of remuneration after receiving a foreign currency loan. If you find yourself in this situation, you may consider converting the loan – that is, changing the currency of the liability into one in which you will earn income under the new contract.
Currency conversion will not be a problem as long as the lender allows you to repay the currency in a new source of income. Remember that any such operation involves lower or higher costs. You can expect commission for carrying it out, as well as losses on bank spreads, i.e. the difference between the sale price and the purchase price of a given currency. Because each bank can apply different fees and rules in this case, you always need to carefully consider the profitability of currency conversion. A single or even double change of currency may make sense, but a more frequent one may translate into a large increase in the total cost of credit.