Anyone looking for a loan without a permanent employment contract will find that the banks are very cautious. Before banks grant a loan, the conditions that are the same for all banks must be met. In addition to sufficient income, the Credit Bureau must be clean and have a permanent job. Neither the bank nor the borrower know what will happen after the time limit expires. If there is unemployment or the employment contract is extended further, all questions banks naturally have a skeptical attitude towards with a loan without a permanent employment contract.
The loan without a permanent employment contract – the prospects
But what is the difference between a temporary and a permanent contract? Companies keep their personnel costs clear with temporary employment contracts. If the order situation is low, the jobs of permanent employees are not endangered. But the employee wants a job without a fixed-term job, especially if he comes from such a job.
A limitation of the employment contract may only be repeated three times. After that, the fixed-term contract automatically changes to an unlimited one. However, these so-called chain contracts are no longer possible with a part-time and temporary law. If you come from an apprenticeship and receive a temporary employment contract, the time limit may only apply once. A normal time limit is limited to 24 months.
Borrowers should know that a loan can only exist if the loan seeker fulfills the three criteria for approval of a loan. That is the sufficiently high income, the impeccable Credit Bureau and the permanent employment. If only one of these features is missing, the bank behaves cautiously and demands other collateral.
In the case of a loan without a permanent employment contract, the amount of the loan and the term are also important. If it is more a small loan that can be paid within the time limit, there can be a loan without a permanent employment contract, the bank sees no restriction here.
Often, house banks and here the branch banks are less willing to grant a loan without a fixed-term contract that is paid within the time limit. Branch banks in particular apply stricter standards here than, for example, direct banks or online banks. In general, several loan offers should be checked. Experience shows that branch banks are more expensive than online banks.
Provide truthful information in the loan application
Banks use the last three salary slips to check income and query Credit Bureau. The bank cannot use these documents to determine whether the employment contract is temporary or permanent. The bank may not ask the employer about data protection. In general, banks could insist on submitting the employment contract, but rarely does a bank require it.
Many employment contracts are generally temporary during the first few years, so that banks can use the data to show the length of employment to determine whether a loan is available without a permanent employment contract. But also in the loan agreements there is the question of a limitation of the existing employment relationship. Anyone who provides false information here may have to expect consequences, especially if the borrower loses his job due to the time limit. The result can then be a loan default because the income has decreased.
The credit protection
A loan without a permanent employment contract requires additional loan security from the banks. Even with a customer who has an unlimited employment relationship, they cannot 100% see whether the job will remain until the loan is repaid. If a loan can be repaid within a period of 24 months, the customer will receive a loan like all other borrowers.
It is not only employees but also highly-paid specialists who work on a project at universities, for example, receive temporary employment contracts. Banks often grant a loan to this group of people because a very good credit rating is required. The credit opportunities increase if the partner of the loan seeker signs the loan agreement without a permanent employment contract. This must be solvent and have a permanent position.
Employees with fixed-term contracts are practically always in the air, and predictability in the future is not possible. Even if a good salary is paid during the fixed-term contract, there is still uncertainty after continued employment. If the customer has been with his house bank for a long time, the credit check will not take place as comprehensively. The customer is known and you know their financial situation.
If only a recent certificate of earnings is required, the time limit will not be recognizable. However, a long-term loan is then a risk. Here the customer has to decide, can he still pay the installment if unemployment is due again or there is another time limit. A budget can help him do this. He compares his income with his expenses and, in the best case scenario, should have financial scope. The version with unemployment benefit should also be calculated.
A surety could also provide the necessary creditworthiness. He then joins the loan contract as the third contractual partner and undertakes to continue paying the installments if the borrower defaults. But a guarantor is also put through its paces. His income, Credit Bureau and permanent employment must be ok so that a guarantee can be given.
However, a guarantee is a risky business. The guarantee is entered in the guarantor’s surety and is treated by banks as a loan. The guarantor sees this when he needs a loan himself and the bank rejects it because the credit rating is no longer sufficient. Many guarantors then want to get out of the guarantee. But this is only possible if a new guarantor can be named.
The situation is similar for a second borrower. He must also be solvent, but he is liable for the loan from his signature under the loan agreement.
The loan without a fixed-term employment contract – the overdraft facility
If you want a quick loan without a permanent employment contract, you could opt for the overdraft facility. The overdraft facility is provided by banks, whereby the customer must have regular cash receipts. The higher his income, the higher the overdraft facility can be. As a rule, banks offer up to three net monthly salaries. So if you earn 3,000 USD net, you could have a disposition over 9,000 USD.
However, the overdraft facility is one of the most expensive loans and should only be used for a short time. If the customer has to make an urgent purchase, the overdraft facility could be a solution. But it should definitely be balanced within the next three or four months. If this does not happen, the overdraft facility adds up automatically. Banks calculate their overdraft interest every three months and they are very high.