In order to be able to take a closer look at the subject of loans for low-income earners, it is first of all examined which consumer area belongs exactly in the cluster to be considered. Consumers are considered low-income earners if their monthly income is less than € 1000 / month. As a rule, these include mini-jobbers, temporary workers in part-time jobs, jobseekers, students or often retirees.

What is meant by the topic of loans for low paid workers

  • In-depth information on the subject of loans for low-income earners
  • Special forms and sub-forms of loans for low-income earners
  • Possible pitfalls in low-income loans
  • What to do if bad Private credit or insufficient credit rating
    • uses

 

What is meant by the topic of loans for low paid workers

Often loan applications are passed on the negative side by the banks, since the income receipts appear to be irregular or too small. The first step in order to increase the likelihood of lending to low-income people is to set the level of the targeted credit line in an appropriate ratio to income.

If a low-income earner has a positive credit rating, including a positive message from a credit reference file, such as the Private credit, the bank will nevertheless be granted the loan at rather high interest rates and generally very tense conditions. Hereby the bank expresses the high risk of loan default.

In-depth information on the subject of loans for low-income earners

In-depth information on the subject of loans for low-income earners

Especially with low-income earners, it is unlikely that short-term financial bottlenecks can be achieved simply and easily. The tendency to borrow is already given by the factor of financial distress. Because of this, it is all the more important to be careful not to fall into the overindebtedness trap. It is strongly recommended that you only finance investments that are really important and that you always want to adequately finance your own income on the premise.

It is advisable, in particular, if only a few incomes per month are available to pursue a livelihood only financings that do not involve excessive monthly burdens due to excessive rates or too long a term. It should be noted that too long a term inevitably increases the total effective cost of the loan. In addition, banks value very long repayment periods for customers as negative features. On average, it is recommended to target a term of approx. 3 years, especially for smaller loans.

Admittedly, it is far more difficult for credit seekers who have low-income status to obtain a loan than for consumers with a high income. To increase the chances of getting credit from a credit institution in the normal way, low earners should consider having a guarantor for the loan or a so-called co-applicant. The Bank sees this as a positive indicator of lending, as it minimizes the bank’s default risk.

Low income earners are also strongly advised to take advantage of financing offers that ensure quick and easy lending, even with the most difficult financial conditions for the applicant.

Because here usury interest and no respectability are to be feared. It is better online to use different credit check portals and to have non-binding offers from various banks presented.

In addition, this also protects the own financing scoring, because with direct individual queries of the credit institutes the request is put on credit usually with the Private credit. Here, however, only the parameter request for credit terms is affected.

And this option has no impact on the rating of the credit rating compared to the first parameter. Several successive requests for credit from Private credit in a short period of time imply that they are currently experiencing serious financial problems.

This assumption is already sufficient that the customer is assumed a possible insolvency and a lending by German banks is excluded to 99%.

Special forms and sub-forms of loans for low-income earners

Special forms and sub-forms of loans for low-income earners

The low-income lending sector offers some alternatives to traditional forms of lending.

    • personal loans

Private loans are very often neglected when it comes to the issue of credit options for low-income earners. It often makes sense to ask family or friends for help. This is usually the much cheaper option than overpaying interest payments to the bank. Should nobody be able to help out in the private sphere, then low earners can also turn to Internet platforms that coordinate private loans. Here, of course, the financing project must be explained in more detail. The investor invests his private assets and, of course, also wants to know what he is initially invested in and whether he can be guaranteed a repayment. However, this counts more on the personal, individual investment idea. If the investor is personally convinced of the project, he will also invest in the project.

    • Pawnbrokers

An admittedly rather unpopular type of loan, which is particularly popular with low-wage earners in large payment difficulties, are pawn shops. It can be exchanged here by the mortgage borrower usually jewelry or other valuables in a Pfandleihaus for money. The value remains then in the Pfandleihaus. If the owner does not raise the pledged item again and within a certain period of time, it can be auctioned by the Pfandleihaus. For this complete situation, neither a good credit rating nor a positive Private credit report is needed.

Possible pitfalls in low-income loans

Possible pitfalls in low-income loans

The potential pitfalls of low-income loans can be complex. The borrower can overestimate himself financially. Frequently, these consumers have little or no reserves, so short-term financial difficulties can not be offset. The banks are sensing a possible chronic insolvency.

For this reason, banks often only grant loans to low-wage earners who have very poor conditions. High interest rates, even in times of low interest rates, are normal. Also, the applicants often act out of a bad financial issue. It is urgent to make sure, even out of self-esteem and self-responsibility of one’s own financial environment, to only make investments that are definitely necessary.

Jobseekers are usually exposed to heavy financial burdens, but here lending by the bank are rather rejected, because the amount of unemployment benefit is usually below the seizure limit, so that creditors simply smell non-attachable loan defaults.

What to do if bad Private credit or insufficient credit rating

What to do if bad Private credit or insufficient credit rating

When granting loans to low – income earners, too, positive Private credit information and sufficient creditworthiness are prerequisites for engaging in any discussions with the bank. There are standardized ways to make a positive impact on monthly income even as low-income earners.

    • part-time job

Thus, a part-time employee with financial constraints is always advised to take on a side job. This increases the monthly income and has a positive influence on the credit rating. However, credit applicants who do not see a possibility to do so can simply involve a guarantor or a co-applicant in the credit process.

    • financing alternatives

So the chances are increased to get the credit too. Financing alternatives that do not necessarily have a positive Private credit are, as already mentioned, financing via personal loans, both in the family environment as well as on special stock exchanges, the use of Swiss loans or the like.

    • promotions

Also not to be neglected in these lists are special municipal subsidies for certain low-income investments. In this case, the granting of funds is subject to completely different requirements than a positive Private creditauskunft. Since the urgency of the issue is more in focus.

Current developments and numbers

The so-called low-wage sector of Germany and the extensive tax benefits allow the area of ​​low-income earners to increase in the future as well. More and more single mothers are deciding to take on mini jobs or low paid part time jobs to protect their children.

A financial cushion can usually not be saved under these circumstances during this time. The issue of lending to low-wage earners is thus also an important issue in the credit market business in the future. Consumers need to be aware, however, that in a traditional contract in this area a positive Private creditauskunft and a solid credit rating are of crucial importance.

uses

Bridge bottlenecks Home Appliances payments
What exactly:

– Kontodispo maxed or other bottlenecks before the next salary payment

– unexpected expenses that exceed the current budget

What exactly:

– Washing machine is defective and must be replaced

– New furniture is needed

What exactly:

– unexpectedly high back payments for electricity, water or gas

– Rent increases or similar

Advantages:
With a small installment loan, these bottlenecks can be overcome quickly. In some circumstances, so expensive fines, reminder fees, etc. avoided. Even the expensive Dispo can be bypassed.
Advantages:
Thanks to a small loan for low-income earners, the expensive financing of furniture, appliances, etc. can be bypassed at the retailer. Also the Dispo with expensive interest must not be touched. A small installment loan is approved quickly and the purchase can be made.
Advantages:
By quickly settling the outstanding claims, a Private credit entry can be avoided. The expensive Dispo must not be used. With a small quick loan for low-income earners, the amount can be paid directly.
Calculation:

Loan amount: 2,000 EUR

Effective interest rate: 1.95%

Duration: 24 months

Monthly rate: 85.04 EUR

Total interest: 40.88 EUR

Calculation:

Credit amount: 3,000 EUR

Effective interest rate: 1.95%

Duration: 36 months

Monthly rate: 85.86 EUR

Total interest: 91.04 EUR

Calculation:

Loan amount: 1,500 EUR

Effective interest rate: 1.95%

Duration: 24 months

Monthly rate: 63.78 EUR

Total interest: 30,66 EUR