The Challenges of Getting Credit, Mortgages, and Loans as a New Resident in Panama

Panama’s growing appeal among expats and foreign investors is undeniable. With its tropical climate, modern infrastructure, and favorable tax laws, many foreigners relocate here seeking a better quality of life. However, one of the significant hurdles new residents often encounter is access to credit, mortgages, and personal loans from Panamanian financial institutions.

Despite the country's open-door policy for property ownership and its attractive residency programs, the Panamanian banking system remains conservative, especially when lending to newcomers. Below, we explore the main obstacles and what new residents can expect when seeking financing.

1. Lack of Local Credit History

One of the most immediate challenges for any newcomer is the absence of a Panamanian credit history. Even if you have an excellent credit score in your home country, Panamanian banks typically do not factor this into their decisions.

Why it matters:

• Banks use Panama’s own credit bureau (APC – Asociación Panameña de Crédito) to assess creditworthiness.

• Without a local credit footprint (e.g., utility bills, local bank account history, or previous loans), most institutions will not consider you a reliable lending candidate.

2. Limited Financing Options for Foreigners

While Panama does allow foreigners to apply for mortgages and loans, not all banks offer expat-friendly lending products, and those that do often impose stricter requirements.

Common limitations include:

• Higher down payment requirements (30–50% is typical).

• Shorter loan terms (15–20 years maximum vs. 30 years for citizens).

• Higher interest rates compared to local borrowers.

• Mortgage approvals restricted to specific property types or developers.

3. Income Verification & Documentation Issues

Panamanian banks are heavily documentation-driven and conservative in their approach. Foreigners may struggle to provide income verification in a format that banks are willing to accept.

Common issues:

• Self-employed expats or retirees may find it hard to prove stable income.

• Income earned outside Panama must often be translated, authenticated, or notarized.

• U.S. citizens may be required to provide additional IRS documentation due to FATCA compliance.

4. Currency & Employment Considerations

Banks prefer clients earning income in U.S. dollars or Panamanian balboas, and who are employed in Panama. This excludes many expats living on foreign pensions, dividends, or freelance income.

Consequences:

• Applications from retirees or remote workers may be rejected or deprioritized.

• Even with a Panamanian job, newcomers must typically wait 2+ years before being eligible for standard loan products.

5. No Credit Portability from Other Countries

Many foreigners are surprised to learn that international credit is not portable. Even if you had a stellar relationship with HSBC or Scotiabank in another country, the Panamanian branch often considers you a new customer entirely.

Workaround:

• You may request a credit reference letter from your home bank, but this is rarely a substitute for local credit history in formal underwriting.

6. Strict Mortgage Requirements

If you're trying to finance a real estate purchase, be prepared for:

• A full appraisal by a bank-approved valuator.

• Life insurance and property insurance requirements.

• Property title searches and legal verifications.

• Sometimes needing a local guarantor (fiador) or co-signer.

7. Slow and Bureaucratic Process

Even when a loan is approved, the process can be slow and bureaucratic, often taking several months to complete. Delays are common due to:

• Manual underwriting.

• Paper-heavy documentation processes.

• Limited digital banking infrastructure.

8. Alternatives & Workarounds

While traditional banks may be difficult to navigate, there are still some paths to financing:

Developer or Owner Financing:

• Many real estate developers offer in-house financing to foreigners.

• Terms may be more flexible, though often with higher interest rates and balloon payments.

Personal Relationships:

• Establishing a relationship with a local bank early (opening accounts, using credit cards, etc.) can build credibility over time.

• Some smaller banks or credit unions may be more flexible once you become a long-term customer.

Private Lenders:

• Non-bank lenders or private investors may offer financing, though due diligence is critical to avoid high-risk terms or scams.

Conclusion: Patience and Planning Required

While Panama offers a welcoming environment for expats in many ways, access to credit and financing remains one of the most complex and frustrating aspects of relocation. New residents should plan accordingly:

• Be prepared to use cash or high down payments for major purchases.

• Start building a local credit footprint early.

• Work with bilingual financial advisors or attorneys to navigate the process.

• Explore owner or developer financing options as viable alternatives.

With time, residency, and a consistent financial track record, access to credit in Panama does become easier, but it's rarely immediate. Understanding these challenges in advance can help you set realistic expectations and make smart financial decisions as you settle into your new life.