Love has entered mutual life and with it the crown of love. The baby is there, long awaited and greeted joyfully. But financial joys often come with joy. Not only does the baby cost money, but the income is reduced. Most of the time, young parents have not yet saved anything and so the question of a loan is raised. But how can a loan be taken out despite parental allowance?
The loan despite parental allowance – the prospects
The parental allowance is a benefit granted by the state so that a partner can take care of the baby if he wishes. It is usually the mother who takes this place. If the mother was employed before the birth, she now receives 67% of the previous income as parental benefit. This payment is limited in time, it is only paid for 12 months. If you want to bridge the financial bottleneck with a loan despite parental allowance, you have to expect difficulties with a loan.
Parental allowance, like child benefit, is a state benefit that is not subject to attachment. This means that this income will not be included in the banks’ budget. Therefore, the bank has to accept a reduced income. The bank and the parents often do not know whether one of the partners will return to work after parental leave. Even if part-time employment is targeted, income remains lower than before birth.
A loan despite parental allowance is not approved if the mother is a single parent, even if she could pay the loan. The reason is that the parental allowance is limited in time. A different situation arises if the loan can be repaid within 12 months, despite parental allowance. But then the rates will be high, which under certain circumstances cannot be paid.
Even with the constellation if both partners have taken out a loan before the birth, the credit chances can be reduced. This process also reduces the creditworthiness of a loan despite parental allowance. The bank regards lending as a risk during this period. Because nobody knows what comes after the time limit. If the single parent becomes unemployed and then receives unemployment benefits or other social benefits, the installments could also no longer be paid and a loan default could result.
A completely different option is available during parental leave, namely when a partner can demonstrate a full-time job and sufficient income. The partner could then take the loan application in his name or at least secure the loan as security. Then the bank will grant a loan since it has two incomes as collateral for at least one year.
However, this project cannot be considered if no partner is available. One could ask for a guarantor among friends and acquaintances. But that’s also one of the things, because the guarantor is extensively checked whether he can easily pay the installments in the event of a loan default. The guarantee is also entered in the surety of the guarantor, which reduces its own credit rating.
Can the overdraft facility be an option?
Often, the loan amount is not so large that the overdraft facility could be used. Banks make the disposition loan freely available to their solvent customers. However, the overdraft facility is expensive, it has an interest level in the double-digit range, some banks charge up to 15% interest. If the credit line granted is exceeded, an additional 5% interest may be incurred.
If you use the overdraft facility, you should make sure that you can pay back within a few months. Repayment would be possible with small installments, similar to an installment loan. If the job is taken up again after parental leave, the overdraft facility could be converted into a small installment loan, which is definitely cheaper.
The alternatives to credit despite parental allowance
A loan despite parental allowance can also be successful with a consumer loan. Many retailers, furniture stores and mail order companies offer the opportunity to purchase everyday items. The customer is often surprised with particularly cheap offers. Think of the 0% financing here. For example, the furniture for the children’s room could be bought in a furniture store.
Even if you are an existing customer in a mail order company, you can fulfill your wishes in installments. In addition to the initial equipment for the baby, this can also be the stroller or the furniture for the children’s room. If the installments were paid on time, then further installments are possible without asking for income. However, if the credit rises above 1000 USD, the mail order company will carry out a more stringent credit check. The goods remain the property of the mail order company until the loan is paid.
Another way to get a loan despite parental allowance are the credit portals. There, private investors offer money to customers looking for loans. If a sufficient number of private investors trust their parents’ loan request, the loan can be successful, for example, via Spin Lender or Across Lender. However, loan seekers should make their loan request understandable and trustworthy. Even if there are negative entries in the Credit Bureau, it should be mentioned consciously.
If the young parents have bad Credit Bureau, banks will refuse the loan simply because of the parental allowance. Usually there are Credit Bureau-free loans that are intended for people who have negative entries in Credit Bureau. However, these banks also have strict requirements for their customers. Income must be sufficient and above the garnishment exemption limit. For a single person that would be a net 1,160 USD.
In addition, the foreign banks require a permanent job that has existed for at least one year and may not be temporary. Parental allowance is also not counted as income at these banks and therefore only the salary remains as security. The Credit Bureau is not queried and the credit is not entered.
If a partner now has a full-time job with a sufficiently high income and a permanent position, the credit could be in his name. However, this only makes sense if the partner also has a bad Credit Bureau. The loans are not cheap, the interest rate is also in the double-digit range similar to the overdraft facility. The loan amounts are also limited. Most of the 3,500 USD are approved, which are repaid in 40 monthly installments, the rate is 105.00 USD.