We have been on our article series of reviewing the modus operandi of loans in different countries. We have already reviewed loans in Spain, Germany, South Africa, Sweden and Denmark and how private or personal loans work in these countries. In this article, we will be reviewing how loan for foreigners in Japan are structured and how a foreigmer living in Japan can obtain personal loan, private loan, car loan or mortgage/housing loan.
Making a decision to live in another country different from yours, such as Japan is a challenge. This is like starting a new life and learning a completely different culture altogether. In fact the new language, new ways of doing things and completely new social-cultural environment will necessitate you understand the ways and means of the country when it comes to money matters. Ways of getting a loan for foreigners in Japan is one of those important economic matters that must be learnt and understood and that’s what this article is about.
Top 5 Loan Categories Foreigners in Japan can use to access fund in 2023
The best broad lending options available for foreigners in Japan in 2023 include Private Loan, Mortgage Loan, Car Loan, Student Loan and Credit Card Loan. As a foreigner you are entitled to any of these loan categories. However the law requires foreign nationals in Japan to pass the necessary prerequisites for loan applicants and have credit checks performed on them to confirm their capacity to borrow and capability to repay.
1. Personal Loan
Fortunately, there are traditional banks that let foreigners borrow money as personal or private loan to cover living expenses or other unexpected cash needs. Personal loans in Japan are provided by traditional banks, with a long history. Their big advantage is the availability of loans and branches of these banks. Loans are also provided by specialized consumer credit companies. These are often owned by large, multi-national corporation. The last one is P2P lending. Peer to Peer (P2P) platforms are marketplaces that bring together people or businesses that want to lend money with those that want a loan. It’s a way for borrowers to get funding without going to the traditional sources of finance, such as banks and building societies.
One of the biggest P2P loan platforms in Japan is Maneo which was launched about 15 years ago. The service connects lenders (aged 20-65) and borrowers (aged 20-60). Maneo verifies the identity, credit grade and the income of potential borrowers (minimum annual income required is approx. 30,000 US$). Borrowers then create a loan listing and set a maximum interest rate.
2. Mortgage (Housing) Loan
There are three Japanese banks that extend mortgage or housing loans to foreigners in Japan for purchasing a home or investment property. They are Prestia SMBC Trust Bank, Shinsei Bank and Tokyo Star Bank.
All three of these banks have English language information available on their mortgage products. However, please be aware that all legal documents, including terms and conditions, will be in Japanese. To the extent that English translations may be provided to you, they are only meant for general guidance purposes.
To access mortgage loan as a foreigner in Japan, you must have:
- Permanent Residence requirement, if any
- Residency requirements
- Employment and income requirements
- Loan purpose
- How much you can borrow
- Available interest rates
- Loan terms
- In addition, there are age requirements for qualifying for a mortgage loan. In general, you must be at least 20 years old to apply; and be younger than 75 years old (sometimes 80-years-old) at the time of repayment. Please check the specific requirement directly with the lender.
You will also be required to qualify for and enroll in group life insurance.
3. Car Loan
“S” Global is one of the best car loan platforms for foreigners working in Japan. “S” Global” is a car sales and purchase service centre for foreigners living in Japan. The platform has a rich lineup of brand new and used cars from various manufacturers, including Japanese cars. They also have a full range of auto loans for foreigners, who usually have difficulty in loan examination. “S” Global supports your car life with a service specialized for foreigners.
4. Credit Card Loan
If you suddenly need money for unexpected expenses, you can get a card loan as a foreigner living in Japan. So, as long as you meet the requirements of the credit card company’s screening process, you can get a card loan just like a Japanese person, even if you are a foreigner. There are two main types of card loans in Japan: bank card loans and credit card card loans, and consumer credit card loans.
Bank Card Loans
Foreigners can also apply for card loans offered by banks. However, most bank card loans require permanent residency, so the hurdle is higher for foreign nationals. Although the screening process is tougher for bank card loans, they have the advantage of lower interest rates compared to consumer loans, which will be introduced later.
Credit Card Card Loans
A credit card loan is a card loan function attached to a credit card such as VISA or JCB. It is important to note that the credit card screening process is somewhat difficult for foreigners and the interest rates are somewhat high.
One of the best card loan for foreigners in Japan is SMBC Card Loan, a card loan platform provided by Sumitomo Mitsui Banking Corporation, one of the largest banks in Japan. Although it does not specify whether permanent residency is required as a screening criterion, bank card loans generally require permanent residency, so please check when you apply.
5. Student Loan
Student loan is offered to college students and their families to help cover the tuition and other fees of higher education. Federally funded loans are better which comes with lower interest rates and more borrower-friendly repayment terms. Factors in student loan include: Duration of your stay granted by your student visa needs to remain for at least 1 year as of when you take up a loan. You have a stable income from your part-time job. You have some savings amd meet required age. One of the best finance companies in Japan that offer student loan is
SMBC.
Can A Foreigner Get Loan in Japan?
Yes. Foreigners can well access loan in Japan. Loan options available to foreigners include personal loan, housing loan, credit card loan, car loan or student loan. However it is advisable to have a permanent residence if you are considering applying for a housing loan to a Japanese bank or financial institution.
They can get a personal loan, mortgage loan, or a car loan. However, it’s quite important to understand the information regarding the entire procedure.
What Are The Types of Loan Providers in Japan?
In Japan, there are three types of loan providers namely: Traditional banks, Specialized consumer credit companies and P2P lending. Getting a loan from traditional banks is the best option. If you qualify with their requirements, then they will provide your personal loan.
Who Are The Eligible Foreigners That Can Access Loan in Japan?
The following are the eligible foreigners to get a loan in Japan.
- Foreign National with a Resident Visa(Permanent/Temporary)
- Foreign national married to a Japanese
- Special Adoption
- A person born as a child of Japanese
- Other Factors That Impact Loan Eligibility
- Age. Age does matter. Banks find it too risky to extend loans for elderly. Therefore, you must be between 20 years old to 70 years old upon the application.
What purpose is your Loan meant for?
The bank will check the underlying reason why you need to loan. The amount and interest rates differ depending on the purpose. You may get a loan for mortgage, personal, business, vehicle financing or more other purposes.
What Role Does My Resident Status as a Foreigner Plays in Obtaining a loan in Japan?
Having a resident status plays one of the important roles in getting a loan in Japan. This will prove that you are living in Japan as a resident and currently have a registered address. Without this important requirement it would be impossible for you to start the application.
What Language are loan contract written in Japan?
Loan contract including legal papers will be written in Japan. It is better if you can speak, read, and write Japanese Language. Although, the bank will explain the terms to you, being able to understand the conversation is also a must.
How Does Home Loan Work in Japan?
In order to obtain a home mortgage in japan, the following are the requirements. These requirements can vary depending on the bank, but this is pretty much how things are currently.
General requirements for getting a home loan
- Age: Somewhere between 20 years old and 65 -69 years old when first applying. This or being 75 – 80 years old when completing the payment.
- Years of continuous employment: At least 2 to 3 years, but this can vary. If you’re self-employed, then this is what will be discussed instead.
- Yearly income: At least 2,000,000 – 5,000,000 yen yearly income. This varies depending on the bank.
- Eligibility to get a group credit life insurance: This varies depending on the bank (the insurance premiums are often included in the loan interest). This is to avoid any problems when repayment due to health issues.
- Whether you have other loans: The yearly debt-to-income ratio needs to be somewhere between 25 and 35% of your yearly income. Therefore, if you have other pending loans, this can affect the loan screening.
- The loan amount can vary largely depending on the bank, but usually, the limit is somewhere between 100,000,000 and 500,000,000 yen.
Conclusion
Before you can obtain loan in Japan as a foreigner, Banks will conduct a credit investigation to ensure you possess the ability to pay back the loan capital plus interest, including your ability to complete the payment without leaving the country too soon. For this procedure, they will ask you to disclose some details, such as your income, salary and your credit history. If you failed to pass this procedure means loan application disapproval.
