ixed-term contracts are part of everyday life for many workers. Permanent positions have long been the exception and no longer the rule. A fixed-term contract is always problematic when a loan is required. Most money houses drop their thumbs almost instantly. It is so difficult to find a suitable loan. Of course, it is not impossible if you know the right starting points.
Put simply, financial institutions don’t like loans with a fixed-term contract for fear. They assume that the borrowers will not be given follow-up employment and will therefore no longer be able to service the installments after the current contract has expired. However, even if an applicant finds a new job, there is still a risk that they will earn less than in their current position. A temporary employment contract also offers no protection against dismissal. In case of doubt, the measure of garnishment of wages would also only help until the end of the contract, since unemployment benefits I (and II) are seized.
In the eyes of many banks, an employee with a fixed-term employment contract therefore does not have the necessary creditworthiness to receive a loan. The foreign word means something like “credit repayment ability” and describes the ability to be able to service the installments independently over the entire term of the loan.
There are two cases where banks ignore their concerns about a fixed-term contract. The simplest case is that the loan term is shorter than the contract term. This can happen more frequently in the academic field, where positions are sometimes limited to three to six years. In such a scenario, the time limit is completely irrelevant.
The second case is about employment in an industry that is always looking for new workers. Computer scientists, teachers, medical professionals and nurses can easily find new jobs. For this reason, banks also look beyond the time limit in these cases due to the positive employment forecast. For this reason, trainee lawyers sometimes even receive loans, although they currently still earn below the garnishment exemption limit.
The situation is much more complicated for workers in industries where there are comparatively few vacancies but a large supply of workers. Here, the help of a second person is a suitable approach to get a loan with a fixed-term contract. With a guarantor or a second borrower who has no fixed-term job, a corresponding application goes through practically every bank.
If you have no guarantor or second borrower to secure the loan, you have to make a choice. The first option would be another form of security. For example, the vehicle letter of your own vehicle is suitable for this. However, even in such cases, only small loans up to 5000 USD are usually granted.
The second option is therefore better for most people with a fixed-term contract of employment: a loan without Credit bureau. In Germany, such loans are primarily granted by credit intermediaries. There is one disadvantage, however: Loans without Credit bureau have a significantly higher interest rate than loans that are subject to a comprehensive credit check. You should therefore be the last option – not the first.
Banks primarily refuse installment loans with a fixed-term contract. A MRP can usually still be set up. This is particularly helpful when less than 1000 USD are needed. Such microcredit is difficult to find as an installment loan anyway. The overdraft facility kills two birds with one stone on a temporary contract.