If an employee wants a loan, the bank asks about the employment contract. However, if the employee can only submit a temporary contract, the bank will reject the loan with a temporary employment contract. The term of an employment contract will be shorter than the term of a loan. A fixed-term contract of employment is usually issued for 24 months. Within this time, there is then the option of a loan with a temporary employment contract.
The loan with a fixed-term employment contract – the starting point
The huge boom in agency workers is gradually diminishing, but temporary employment contracts are increasingly coming into play. Not only the young professionals, but also highly qualified employees at universities and research institutions are affected. Even the state is leading the way in chain contracts in the public sector.
Unions are critical of fixed-term contracts because workers are influenced in their entire life plans. There is simply no financial predictability. Good earnings often do not help either, because the time limit shows up as a risk with a loan.
The employee with a fixed-term contract is handicapped in his financial planning, because banks are rather skeptical about a loan request under these circumstances. It is workers who need a loan for a car without not coming to work. But banks prefer to lend to employees with secure jobs and to officials who may have completed their trial period.
Banks see a loan with a fixed-term employment contract as a risk that the employee will be without income after the fixed-term contract. Protection against dismissal is also causing problems for banks. Without income, however, means that the monthly installments can no longer be paid. An employee should also see this for himself when looking for a loan with a fixed-term employment contract.
A fixed-term contract usually lasts two years. If a loan can be paid during this period, it will also be approved. No loan is usually approved for longer than the time limit.
Therefore, the worker should ask the questions:
- what are the chances of an extension of work?
- can I quickly find a job again?
- can the rate possibly be paid by unemployment benefits?
- are real assets available that may be sold to repay debt?
If you can answer the questions positively, you can look for a lender who still approves a loan. However, not every bank will give its yes to a loan.
Exceptions to a temporary employment contract
Before applying for a temporary employment loan, an employee should draw up a budget. All income and expenses should be recorded in it. If there is financial scope, there is a good starting point for a loan.
Then a little preparatory work can be done. With a loan comparison, the employee can run through some scenarios for loan offers. He can enter the loan amount and the loan term and will then see the monthly installment to be paid. He can do this until a rate appears that could also be paid in the event of unemployment.
It is not only unemployment that often makes it impossible to pay loan installments. Nobody is certain that they will get a serious illness. Then there would be an incapacity for work, with a pension that is probably not generous. The rate should also be adjusted accordingly. Now that the amount of the installment is certain that the employee can safely afford, he should look for a bank.
Also when comparing loans, he sees not only the interest rate on a loan, but also the terms and conditions of the lender. It could then be seen which lender also approves a loan with a time limit. The collateral to be submitted will then probably be listed.
Sometimes banks also approve a temporary employment loan if the loan seeker has a good credit rating. One thinks of a scientist in a research object or a teacher. Officials with their probationary period also have a good chance of getting a temporary employment loan.
If the loan amount is so high that it cannot be paid within a two-year period, a loan could perhaps be concluded. However, the customer’s credit rating must be impeccable. Lending also works if the loan seeker has been a customer of the bank for many years.
The banks then know about the customer’s finances and will then check whether all liabilities have been paid on time in the past. To do this, the customer’s Credit Bureau is queried. If the Credit Bureau is burdened with negative entries, then there will be no loan with a fixed-term contract anyway, because then the bank has a double risk.
That’s how many loan offers you get
In summary: Anyone applying for a loan, regardless of which bank, must have a sufficiently high income, an unencumbered Credit Bureau and permanent employment without a fixed term. If the amount of income is correct and the Credit Bureau is clean and the permanent position without a fixed term, the loan seeker has the best conditions for a loan.
The credit opportunities are increased if a guarantor can be named. However, this must be solvent. The aforementioned credit terms also apply to him. However, a guarantor should be an unconditional confidant. Think of the partner or the parents or grandparents. The guarantor must also know that if the borrower defaults, he must continue to pay the loan.
If the customer has the prospect of an extension of the employment contract, a personal interview with the bank and a corresponding certificate from the employer could also result in a loan with an unlimited employment contract. This is especially important if it is known that the employer always extends the fixed-term contracts.
Overdraft facility, which almost all employees are likely to have, offers a quick credit solution. Banks provide it to customers who have regular income. According to how high the income is, the bank provides up to three net monthly salaries. If someone now earns 2,000 USD net, the overdraft facility should already be 6,000 USD. However, this loan is expensive and should only be used for a short time.