Loan for apprentices: this is how you avoid the hurdles
Apprentices often find it hard to get credit at the banks. Their income is not yet high enough that repayment seems to be possible. However, if the car needs to be repaired urgently or if other expenses are not to be paid out of reserves, a loan may be required. What can trainees do in this case and what funding is available to them?
These requirements must be met by trainees
For young borrowers, banks look even more carefully at whether they meet the requirements for lending. Minor trainees are not allowed to finance for legal reasons. Under the law, children are limited in their ability to work after the age of seven, but if a young person under the age of 18 wants to complete a loan, further conditions will be available. In this case, both parents and guardians must agree to the contract. The sole signature of the parents is therefore not enough. What at first glance sounds like unnecessary bureaucracy serves to protect the young person and his parents. Trainees should be protected from massive financial problems and over-indebtedness during training and in the early stages of employment.
But full-time apprentices are usually not among the most popular customers at the banks. Often, they can not fully meet the strict conditions that a bank needs to put on the creditworthiness of the borrower. This includes a regular income, which arises from a permanent employment. Income such as child benefit, vocational training allowance or payments under the Vocational Training Act are not included. Even if the young borrower receives such benefits, he may not borrow. In addition, the probationary period must be completed at the time of borrowing and the trainee must have been in training for at least six months. Negative bank registrations, a permanent residence in Germany and a German bank account are further conditions that have to be met. They also apply to every other borrower in Germany. The demands on the young borrower are therefore quite high. Many apprentices barely fulfill them and therefore do not receive any credit. Ultimately, the banks attest a weak credit rating for a young person. It leads to the fact that the repayment of the loan in the long run is not secured. But there are some ways to increase the chances of obtaining a loan.
To improve the chances during the training on a loan
A big problem for trainees is the proof of a permanent employment contract. Often, an apprentice in education does not know what will happen after this important phase in his professional life. The training company is not forced to take over the specialist after the training. When it’s unclear how things will continue after the final exam, the bank often rejects lending. A regular income is not secured in this case after training. Thus, the return of the loan is not guaranteed.
The apprentice can remedy the situation by submitting a written confirmation from the training company with which the takeover is promised. This gives the young borrower and the bank the necessary assurance at an early stage that a long-term income is guaranteed. Unless this confirmation is issued by the employer, the credit should be such that it is safely repaid during the training period. This also increases your chances of getting a permit. Of course, low incidentals and extra income can also help to increase credit quality and get credit.
A short term and a low loan amount are further important parameters for the credit approval. If only a short payment obligation arises, or if it is a manageable sum, the banks are more willing to agree to the loan application. With a maximum term of 12 months or a financing amount of up to 5,000 euros, the trainee often receives relatively cheap loans. Whether the expensive disposition credit is an alternative, should be checked in each case. It may be available quickly, but is too expensive compared to the small loan.
Anyone who places a guarantor or a co-applicant for his credit also increases his credit rating. The creditworthiness of the partner must of course be confirmed by a regular income and a faultless bank. In the case of a guarantor, the guarantor will ensure that the loan is repaid to the bank if the trainee is in arrears with the service. This increases the security for the bank that the payment obligation is settled reliably.
These funding aids apply to trainees
An alternative to the classic installment loan may be state subsidies. If apprentices in training can not live with their parents, vocational training allowance is an option. This support is granted without interest, it increases the monthly income. A claim under the Vocational Training Act can exist in education if the apprentice has not yet reached the age of 30 and attends a vocational school, a technical school, a technical college or a vocational training college. And finally, one can ask parents to get the child benefit from them. It is granted at least until the age of 18, the payment runs until the completion of the vocational training.