Temporary employment relationships have existed in areas such as sports or the arts for a long time. They are also commonplace in science, where doctoral candidates and scientists almost always receive fixed-term employment contracts. In the private sector too, the number of fixed-term employment contracts has risen sharply in recent years.
Firms actually achieve a prolongation of the probationary period by only a limited extension of employment. Likewise, companies can carry out needs-based employee planning by not renewing expiring contractual relationships without having to make redundancies if fewer orders are made.
However, there are often small or big wishes in life that not everyone can afford immediately. Is there then no way to borrow money among the circle of acquaintances, only a walk to the bank remains. Actually, no problem, provided that all conditions of banking institutions for the successful lending are met. But what about when you have a job, but this employment relationship – as is common in many areas – is only temporary or for a certain period of time designed?
Requirements for a loan for a fixed-term employment relationship
If the desired term of the loan, for example, for a manageable small loan, shorter than the fixed term of the employment contract, credit institutions usually do not have problems with lending.
If everything goes as planned, the loan is already fully repaid before the borrower can face the threat of unemployment. However, a longer repayment term, which extends beyond the time frame of the fixed-term employment relationship, is not necessarily an exclusion criterion for banks.
An employee may expect to receive Unemployment Benefit I on completion of a fixed-term employment contract, amounting to 60 per cent of the last net earnings. Thus, a bank can count on a corresponding calculation even in such cases with another loan repayment.
If a fixed-term employment relationship is well-endowed, some banks also authorize borrowing for the duration of the employment relationship plus one year, since then the unemployment benefit I for livelihood and loan repayment is high enough.
- Choice of documents
From the loan documents usually to be submitted to banks, there is not always necessarily a temporary employment relationship. Some lenders only ask for the last three pay slips, which usually do not mention that it is a temporary job.
The term of an employment relationship is therefore only apparent from the employment contract and is only known to a bank if it requires the submission of the employment contract or inquires about the status of the employment relationship. However, each borrower must answer the question posed in a loan application as to whether the current employment relationship is temporary.
This also applies if the bank does not request a copy of the contract. If this question is not asked in the loan application, the borrower does not automatically have to point out a temporary employment relationship. However, he is obliged to apply only for loans, the repayment of which he can certainly guarantee.
A credit agreement can also be provided with the possibility of free special repayments. Of these, a fixed-term employee can make use as often as possible during the term, so that the loan can also be repaid until the end of the employment relationship. Some providers give smaller loans even without an employment contract and without submission of a pay slip.
Although it may be necessary to refrain from submitting documents, the applicant must always answer all questions honestly. If consumers take out a loan and deny the lender the existence of a temporary employment relationship, they can expect a loan repayment if the false information is revealed.
- Special form: second applicant for a loan
A loan may also be requested by two persons, such as the borrower and the spouse. If it comes to difficulties in repayment, the bank can contact both persons. If there is a second applicant with a permanent position in the case of a temporary employment relationship, banks see the overall picture and can not be deterred from lending by a fixed-term employment contract.
- Special form: guarantee
In addition to the possibility to apply for a loan together with the partner, a guarantor can be named. This is reviewed in detail by the bank, as it is liable for the duration of the loan with its own income. A guarantor should always be a person of trust, to whom his duties must be clearly made clear.
- Special form: longtime bank customer
There are also good chances of obtaining a loan for a fixed-term employment relationship with customers who have been with one and the same bank for many years. The credit institution is usually aware of the customer’s income and payments. If the customer has always been solvent in the past, the bank will also grant him a loan on a temporary basis.
- Private credit clause in lending
Anyone wishing to open a checking account, sign a mobile phone contract, or take out a loan, will not pass a Private credit request that is part of any of the above contract models. However, it will be problematic if loan installments are not repaid in time or direct debits are not honored. This leads to a negative Private credit and worsens the Private credit scoring and thus the credit rating.
In the case of negative entries in the Private credit, when applying for a loan, a high interest rate is calculated, which prizes the credit default risk of the financial institution.
How do you get a loan?
- Alternative: Switzerland without Private credit
Switzerland has no institution comparable to the German Private credit, so there is no need for a Private credit query or an entry. In Germany, there are numerous credit intermediaries who arrange loans to Switzerland. However, the omission of the Private credit request does not automatically mean that the Swiss lenders waive the credit check. Prerequisites are a residence in Germany and a budget that leaves enough room for monthly payments.
- Alternative: Credit without Private credit from private
Personal loans are becoming increasingly popular in Germany. In the meantime, numerous Internet platforms have become established and are becoming increasingly competitive for commercial banks and savings banks. Not only borrowers with a weak credit rating, but also borrowers, who would also get a loan from banks, rely on personal loans. The agency portals are open to anyone, but credit requests are not always met. The portal operator must also protect the interests of the funders and therefore carries out a Private credit examination. The portals make classifications into high-risk groups so that lenders learn how to assess the creditworthiness of a loan seeker. The weaker the credit rating, the higher the interest payable.
Advertising with statements such as “Loans for the unemployed” or “Money for negative Private credit” should be considered from the outset with the utmost caution. For example, warning signals are required if a life insurance or home savings contract is required to increase creditworthiness. Other intermediaries charge fees in advance or send documents by cash on delivery.
Reputable providers also demand no fees for loans despite Private credit entries, whereas dubious intermediaries usually aim for commissions from insurances or a home savings contract.
Loans with residual debt insurance
If, at the time of granting a loan, a residual debt insurance is taken out at the same time, this occurs as soon as the borrower can no longer pay the monthly installments. In the event of unemployment or a long-term illness, the monthly installments continue to be paid by the insurance company. In the event of sudden incapacity for work, the insurance company also pays installments.
In the event of death, the outstanding balance is paid in one amount. If the borrower concludes a residual debt insurance, he has of course further costs. However, this gives him the opportunity to obtain a longer-term loan despite a fixed-term employment contract.
Further interest rate developments and numbers
The basic question is, how much money should be borrowed and how long the loan should run. The shorter the term, the better the interest rates are. Borrowers should plan carefully if a higher rate can still be covered by their income. If you would like to repay an already existing loan, this should also be stated in a new application. If loans already exist, this may have a negative effect, since the borrower then has to pay off two loans.
A loan amount of, for example, 10,000 euros is currently offered at a term of 60 months from just 1.97 percent interest. With a term of 36 or 48 months, the same amount is also available from about 1.99 percent. Of course, the monthly payment to be paid increases with a shorter term.