Cash loans for seafarers

Loans to seafarers and workers on board fishing vessels are rare in Croatian banks.

The realization of a housing loan financing the purchase of real estate is also possible for seafarers, in a number of Croatian banks. Namely, securing a loan with existential real estate psychologically obliges the borrower, and provides the bank with the security of regular repayment of the loan.

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Seafarers’ need for cash and the misapplication of borrowed funds has not recently been met with the approval of Croatian banks. An easy and fast way to cash was available to more Croatian citizens, and it was an impossible mission for seafarers.

Why are seafarers at risk?

Seafarers are people who knowingly live dangerously, and according to statistics on the world’s seas, an average of 525 people lose their lives each year. Therefore, the loan repayment security instruments required by the bank to finance seafarers have a significant rise in the cost of borrowing money.

For the purpose of assessing the creditworthiness of a potential borrower, the bank uses data on regular income in the previous period, employment status, employer with which the potential borrower is employed, credit load of the client, marital status, number of dependents, qualifications, assets, etc.

Until recently, cash loans for sailors were a utopia. An increasing number of banks seem to recognize the quality of the customer as a sailor.

Credit risk of the bank implies possible monetary losses incurred due to the debtor’s defaulting credit obligations (given the agreed dynamics and amounts of repayment of loans in maturity). In order to reduce credit risk, banks use instruments to secure the collection of receivables from clients with whom a credit relationship has been established.

A large number of seafarers enter into a fixed-term contract with the employer. Given that seafarers are often employed on foreign ships and spent their working lives abroad, the basic instruments for securing a loan are largely meaningless.

The sailor the bank will charge

Pomorca will be considered by the bank as a potential debtor if it is a citizen of the Republic of Croatia who has a contract of employment with a domestic or foreign employer.

The debtor’s creditworthiness is calculated according to the usual rules of Croatian banks according to whether the seafarer earns more or less than the average Croatian net salary.

The amount of the seafarer’s earnings is calculated by dividing his total earnings in the last year by the number 12, and the resulting value represents the regular monthly earnings of the potential debtor.

If a seafarer earns regular wages that are less than Croatia’s average net salary, a larger number of banks will borrow up to 1/3 of the unpaid wage bill. If a seafarer earns monthly earnings in excess of Croatia’s average salary, most Croatian banks will include up to 2/3 of the average Croatian net salary in creditworthiness.

In calculating creditworthiness, certain banks are willing to include the fee that a seafarer receives when he is not sailing.

A seafarer may enter into an employment contract for a fixed or indefinite period. Banks will credit a seafarer who has extended or entered into a new contract of employment (part-time or indefinite) at least once in the last 18 months.

For fixed-term seafarers, the time spent onshore may not exceed seven months at the time the credit application is submitted.

Documentation required to prove the seafarer’s creditworthiness

In case the bank positively assesses the seafarer’s creditworthiness, an additional condition for lending is the achievement of the client’s status. The client’s status at the seafarer’s bank can be obtained later up to three months after the loan is approved.

Transferring the proceeds to the bank (in which the loan was made) for the entire duration of the loan repayment is a contractual obligation of the debtor.

The seafarer is obliged to provide the bank with the following documentation in support of its creditworthiness:

  • a copy of your ID / passport
  • the bank’s original confirmation of the balance and cumulative turnover of the foreign currency account for the current and the previous year
  • a copy of the employment contract
  • a copy of a naval booklet or a matriculation
  • payroll for the last 12 months

To reduce the risk of collection of seafarers’ claims, a number of banks are opting for loans to seafarers who have at least five years of experience, have spent at least 18 months on board in the last three years, and have a maximum duration of 6 months.