The taking out of a loan is granted by the banks and savings banks under the presentation of certain conditions. These include a fixed earned income, a fixed residence and a minimum age of 18 years. A check of creditworthiness is also required. The information is retrieved from Schufa and other credit agencies such as Infoscore or Creditreform. If there is information that the applicant has not settled payments in the past, this leads to a negative credit rating. As a result, the loan application may be rejected.
Another criterion that often leads to the rejection of a credit request is the fixed-term employment contract. The reason for this is the lack of prospect of servicing the loan over a term that extends beyond the term of the employment contract. As a rule, borrowing takes place over a period of three to six years. There are small loans that are serviced more quickly, but a fixed-term employment contract usually runs for one year. The bank assumes that at the end of the year there will be no secure income with which to service the loan. Thus, it is difficult to obtain a loan with a fixed-term employment contract. We will show you solutions and ways to legally circumvent this provision.
The loan despite a fixed-term employment contract
There are several ways to get a loan with a fixed-term employment contract. A comparison of the offers is a first step. There is no legal requirement that prohibits the granting of a loan in the case of a fixed-term employment contract. It is up to the bank to decide whether to grant the loan to a customer. Many banks will refuse to grant credit on the grounds that repayment over the entire term is not secured. In many cases, the applicant is unable to prove a regular income for the period after the expiry of the time limit.
What are the arguments against a loan with a fixed-term employment contract??
Reasons against taking out a loan do not only exist on the part of the bank. The borrower should think carefully whether he wants to bear the risk of borrowing if he has a fixed-term employment contract. This is especially true if the term of the loan exceeds the duration of the employment contract. The reasons for not taking out the loan differ between the credit institutions and the applicant.
Risks for the bank
- Repayment due to lack of income is not guaranteed
- No protection against dismissal in the case of a fixed-term employment contract
- low income in the case of a new employment contract
- Loan cannot be serviced to the end
- Wage garnishment remains fruitless
Risks for the borrower
- Loan cannot be serviced to the end of the term
- Wage garnishment or other enforcement measures are threatening
- negative credit rating due to indebtedness
Does this difficulty apply to all types of credit or does it affect specific credits??
As a rule, financing with a fixed term is affected by a rejection of the credit request. In addition count for example credits for real estates, homes or cost-intensive vehicles. Framework loans are often approved. This is a type of overdraft facility granted on an external account. It can be drawn down and repaid as needed.
For small loans from 100 to 3.If you have a loan of up to EUR 000 with a short term of 30 days, you have a good chance of successful payment, even if you have a fixed-term employment contract. By means of scoring system, which is specially designed for short-term loans, even customers with medium creditworthiness can get a loan.
Solutions for obtaining credit
A credit without a credit history and small loans as a solution
In the case of a credit without a credit history, the creditworthiness of the customer is not checked or only checked to a limited extent. Such a loan can be taken out without taking into account the earned income. As a result, it is possible to get this loan with a temporary employment contract. The VEXCASH instant credit is optimal, since the amount can be paid out still on the same day. So it is possible to bridge short-term payment difficulties. Repayment takes place within 30 to 60 days. In this case, the fixed-term employment contract is not an obstacle, if the repayment before the end of the employment is ensured.
There are banks that charge very high interest rates for loans on fixed-term employment contracts. Also the conclusion of additional insurances for the security of the credit are sometimes demanded. For this reason, it is important to check the conditions in detail when taking out a credit without credit history.
A loan for two
The inclusion of a second person in the credit agreement is a good solution to obtain the commitment of the bank. If the guarantor is a person with a fixed salary and a good credit rating, there is nothing to prevent the loan from being disbursed. The borrower, who has a temporary employment contract, is also listed. Both borrowers act as joint debtors. If the installments are not serviced, the bank will turn to the person who has the higher earned income. From this person demands the entire loan amount including costs and interest. Since the bank can choose which joint debtor to take recourse to, it chooses the borrower with the higher income. Thus the protection is higher with two borrowers.
For the second person who agrees to take out the loan, there is the risk that he or she will have to repay the loan alone. This is the case when the employment contract is not renewed or no new job is found. Often spouses and partners decide to take out a loan together. This also applies to parents and children, very good friends or siblings.
A loan with the help of a guarantor
A loan with a fixed-term employment contract can be approved if a guarantor can be found to be included in the contract. The guarantor does not act as a borrower. This means that he does not get the disbursed sum. Initially, the guarantor is not responsible for the repayment of the installments. The bank agrees on the installment payment with the borrower. If the latter is no longer able to pay, the bank approaches the guarantor as a third-party debtor. The guarantor then takes over the installment payments or the payment of the entire loan amount.
If the borrower finds a guarantor, he has the advantage that the financing he wants is approved. The guarantor takes the risk of paying for a loan he did not take out. For this reason, guarantors are usually found among family members and very close friends.
The pledge loan
A pledge loan finds approval regardless of the financial situation. In a pawnshop, a valuable item is deposited for cash. During a period of several weeks or months, the money is repaid and the pledged item is released.
The risk for the borrower is that he cannot raise the money in time and loses his valuable object. The lender bears the risk of overestimating the value and not being able to sell the item as hoped for. In the worst case, no buyer is found and the lender can no longer redeem the pledged item. If you want to protect yourself against an account garnishment, you should inform yourself about the general conditions of a garnishment protection account.
Type of time limit as a criterion for success
Many banks do not reject a loan outright when a fixed-term employment contract is presented. Rather, a check is made as to what kind of employment contract is involved and why the time limit was agreed upon. Consequently, a new hire is tied to a time limit. This has advantages for the employer and the employee. They can get to know each other and test the joint work without being bound by the strict protection against dismissal. The cancellation is possible from one day to the next. In addition, there are other time limits, some of which can have a positive effect on the granting of credit.
What are the common types of fixed-term employment contracts?
Basically, a loan is difficult in the case of a temporary employment contract that expires at the end of a season. Seasonal workers in the hotel and catering industry are usually affected by this. If no employment contract can be proven for the time after the end of the season, this often follows to a refusal of the credit.
Fixed-term contracts are also common at universities. If you cannot prove that you have a permanent position as a research assistant or research associate and have only received a teaching assignment, you may be rejected. In the event that it is already clear that the teaching job cannot be continued, it is unlikely that the loan will be approved. If the university has sufficient funds and proof to extend the teaching contract, it is possible to get a loan with a fixed-term employment contract.
Temporary employment contracts that are signed with the aim of being taken on in permanent employment are viewed positively by some banks. Thus, the application may be worthwhile in the case of a temporary employment contract.
Further credit requirements
Regardless of the type of employment contract, borrowers should meet other basic requirements:
- Very good credit rating
- Minimum age of 18 years
- Income must be sufficient to cover living costs and loan installments
If these basic requirements are not met, a loan application would be rejected even if a permanent employment contract is presented.
Term of the credit and the employment contract
In some cases, it is possible to pay off the loan before the fixed-term employment contract expires. This can be realized very well, for example, with a short-term loan. In the event that the current employment relationship ends and the transfer to a temporary employment relationship takes place, a loan can be approved. If the customer can prove that he can safely service the installments despite the limited term of his employment contract, there is a good chance of obtaining a loan.
What to consider regarding the term of the loan and the employment contract?
A secure loan with a fixed-term employment contract can be approved if the term is shorter than the fixed term of the contract. The contractual relationship is considered terminated when the loan is repaid.
If a high income can be generated from the temporary employment contract and if a new job is in prospect for the customer, a credit approval is possible. The same applies if it can be inferred from the current employment relationship, from life or from the situation on the labor market that the borrower will not slip into unemployment.
In many cases, the bank is willing to finance a smaller loan amount than the desired one. To determine the rate amount, all expenses are subtracted from income. In this way, the bank manages to determine the loan amount that the customer can afford via the rate.