How to take out a loan in foreign currency: Step-by-step instruction

Nowadays, borrowers are cautious about foreign currency loans, since their benefit depends not only on low interest rates, but also on the stability of the exchange rate. During periods of economic instability, currency fluctuations can lead to increased repayments, making such loans less predictable.

However, with the right approach and risk assessment, it can be a profitable tool for the borrower. In this article, we will analyze how to apply for a foreign currency loan, what conditions are offered by banks, as well as what to pay attention to in order to minimize risks.

In Armenia, the legislation restricts the granting of loans in foreign currency for individuals. According to Armenian law, consumer loans and certain mortgage loans must be granted exclusively in AMD, while mortgage loans for non-resident individuals can be granted in foreign currency.

However, loans in foreign currency are available for legal entities and individual entrepreneurs. For example, VTB (Armenia) offers small business loans in USD and EUR with interest rates of 8.5% and 6.5% per annum respectively.

Evocabank provides business loans in AMD, USD and EUR, with interest rates from 12% in AMD, from 7.5% in USD and from 6% in EUR.

Thus, foreign currency loans in Armenia are available mainly for businesses, while for individuals such loans are restricted by law.

What is a foreign currency loan and who is it suitable for?

A foreign currency loan is a loan provided by a bank in foreign currency (dollars, euros, etc.). It can be useful in the following cases:

1. You earn in a foreign currency - for example, you work for foreign companies or receive your income in dollars/euros.
2. You are planning a purchase abroad - for example, real estate, a car or a business.
3. You want to take advantage of lower interest rates - sometimes rates on foreign currency loans are lower than on local currency loans.

However, it's important to consider currency risks - if the exchange rate rises sharply, the amount owed in local currency terms will increase. Although foreign currency loans for individuals in Armenia are limited, mortgages in dollars and euros remain available to certain categories of borrowers. We have analyzed the market and selected five most favorable offers with low interest rates.

Who can take out a loan in foreign currency in Armenia, and what loans are available?

In Armenia, legislation strictly regulates the issuance of loans in foreign currency. Resident individuals can receive such loans only in exceptional cases—for instance, when taking out a mortgage. In all other cases, most loans must be issued in Armenian drams (AMD).

Foreign currency loans are primarily available to:

1. Legal entities and individual entrepreneurs operating businesses in Armenia.

1. Companies engaged in export-import operations, benefiting from borrowing in the currency of their contracts.

1. Individuals planning to take out a mortgage.

For example, Evocabank and IDBank offer foreign currency loans, providing flexible conditions for entrepreneurs.

Thus, if you're a private individual and not a non-resident, obtaining a foreign currency loan in Armenia can be challenging. However, such loans remain accessible for businesses, and banks offer various terms depending on the loan amount, duration, and purpose. It is also possible to obtain a mortgage in dollars or euros.

We have selected the top five mortgage offers in dollars and euros based on the lowest interest rates. These loans offer attractive terms compared to others. Some are available to residents, others to non-residents:

1. Ardshinbank (EUR, 9.6%) – The lowest interest rate, high maximum amount (€400,000), and long loan term (20 years). Available to non-residents.

1. Ameriabank (EUR, 10.12%) – Second-best rate, minimal initial payment of only 10%, maximum term of 30 years. Available to non-residents.

1. Fast Bank (USD, 10.56%) – Offers a low dollar mortgage rate, a high maximum amount ($500,000), and a flexible term (up to 20 years). Available to residents.

1. Ardshinbank (USD, 10.8%) – Attractive interest rate, but requires a high initial payment (30%). Available to non-residents.

1. AraratBank (USD, 11.43%) – Another competitive option, but with a lower maximum amount ($200,000) and an initial payment of 30%. Available to residents.

These loans suit those seeking minimal interest rates, long-term loans, and flexible conditions for down payments.

Main Borrower Requirements

Conditions for obtaining a foreign currency loan vary by bank but typically include:

1. Citizenship and registration – foreign currency loans are primarily available to legal entities and non-resident individuals, while resident individuals face limitations.

1. Income in loan currency – banks usually favor borrowers earning income in the same currency as the loan.

1. Credit history – a good credit history increases the likelihood of approval.

1. Collateral – for large loan amounts (e.g., mortgages), banks may require collateral (real estate, cars, business assets).

1. Down payment – mortgage and auto loans usually require an initial payment of 20-30% of the purchase amount.

How to Obtain a Foreign Currency Loan: Step-by-Step Guide

Step 1. Choose a bank and compare terms

Before applying for a foreign currency loan, it's important to compare offers from different banks. Pay attention to:

1. Interest rates – these can be fixed or floating.

1. Fees – for loan issuance, account servicing, and early repayment.

1. Borrower requirements – possibility of obtaining a loan without income in foreign currency.

1. Additional conditions – mandatory insurance, collateral, guarantors.

Tip: Use the AFM loan calculator to estimate your total loan costs.

Step 2. Preparing Documents

To apply for a foreign currency loan, you may need the following documents:

1. Passport
2. Proof of income (e.g., income and tax payment statement—an equivalent of Russia’s 2-NDFL—or bank account statements)
3. Employment contract or tax statement (for individual entrepreneurs)
4. Credit history report (required in some cases)
5. Collateral documents (if applicable)

Step 3. Submitting the Application

You can submit your application:

1. Online – via the bank's website or mobile app
2. In person – by visiting a bank branch

After the application is submitted, the bank assesses your creditworthiness and decides whether to approve the loan.

Step 4. Approval and Contract Signing

If the bank approves your loan, you’ll need to sign a contract specifying:

1. Loan amount and currency
2. Interest rate and repayment terms
3. Possible fees and penalties
4. Borrower rights and responsibilities

Important: Carefully read the contract, paying special attention to penalties for late payments and potential changes in the interest rate.

Step 5. Receiving Funds and Loan Repayment

After signing the contract, loan funds can be disbursed:

1. To your foreign currency bank account
2. In cash (less common; depends on bank policy)
3. Directly to the seller (e.g., when purchasing real estate)
4. 
   

Loan repayments must be made according to the agreed schedule. It is essential to monitor exchange rates to avoid increased payments if the currency rate rises.

Which Banks Provide Foreign Currency Loans?

The table below shows current offers for foreign currency loans from Armenian banks, including key parameters: effective interest rate, available currencies, loan amounts, and repayment terms.

How to Avoid Overpaying on a Foreign Currency Loan?

1. Monitor exchange rates – When the exchange rate drops, consider making payments in advance to reduce overall costs.

1. Repay your loan early – If possible, repay your loan ahead of schedule before rates rise.

1. Choose banks with currency conversion options – Some banks allow converting your loan into the national currency if exchange rates change significantly.

1. Keep savings in the loan currency – This reduces dependence on currency fluctuations and protects you from unexpected expenses.

1. Make payments during periods of low volatility – Try paying larger amounts when the exchange rate is stable or falling.

These tips will help you make your foreign currency loan less risky and avoid unnecessary expenses.

Conclusion

Foreign currency loans can be beneficial financial tools, but only when approached carefully and with a clear understanding of risks. To minimize potential overpayments, monitor exchange rates closely, utilize early repayment opportunities, and choose banks with flexible currency conversion conditions. Keeping part of your savings in the loan currency and making payments during low-volatility periods also reduces financial risks.

Banks offering the most favorable foreign currency loans in Armenia:

1. VTB (Armenia) – Small business loans in USD and EUR starting from 8.5% and 6.5% respectively.

1. Evocabank – Business loans starting from 7.5% in USD and 6% in EUR.

1. IDBank – USD loans with variable interest rates.

1. AMIO Bank – Customized terms for foreign currency loans.

If you're considering a foreign currency loan, compare terms from different banks and use the AFM loan calculator to select the most advantageous option. If you found this information helpful, feel free to share it with your friends—understanding foreign currency loan nuances can help you avoid unnecessary expenses!