When a child sees the light of day, one parent usually stays at home to take care of the offspring extensively for the first few months. During this period there is no income, which is replaced by the state with parental allowance.
This amounts to 67 percent of the last net income. This is to ensure that there is no financial bottleneck during parental leave and that high-earning young people are also given an incentive to have children. Parental allowance is paid for a maximum of 14 months.
A child is expensive
Especially in the first months of the child’s life, there are a lot of costs that would otherwise not have to be planned in the normal household. Often a new car has to be purchased so that the family has enough space. The same applies to the apartment, the purchase of children’s room furniture, a stroller, car seat for babies, clothing and many other things that arise around the new earthling. Many thousands of USD must therefore be raised in order to be able to properly prepare everything. Money that many young families do not have and are therefore looking for a loan while receiving parental allowance.
Many banks are very skeptical
Many banks and savings banks do not recognize parental allowance as income. After all, it is a state benefit that is also limited in time. Therefore, many young parents have the problem that a loan is not granted during parental allowance. In any case, not if the parent who is on parental leave wants to apply for the loan while parental allowance alone. However, there are alternatives that appear worthwhile in such a case.
The consumer loan
So the parent who is on parental leave can apply for a consumer loan. This is not awarded directly by the bank, but by the trade. If something is bought for the child, for example, this can be financed with the help of the consumer loan. Since the consumer credit is tied to a specific purpose, little value is placed on “correct” income.
It is much more important that the Credit Bureau fits and that there are revenues that should be higher than 450 USD per month. Whether the income is parental allowance, other social benefits or a fixed income is secondary and is not relevant for a pure consumer loan. The trade has the financed goods as security, which can be reclaimed if the monthly installments are not paid.
The second borrower on a loan while receiving parental benefit
Another very good option for a loan during parental allowance is when a second borrower is involved. A person who is not on parental leave, does not take advantage of state benefits and has a fixed income. This income must be above the garnishment allowance for the loan to be approved.
In this context, the banks and savings banks are happy to see the second borrower in a close connection to the actual borrower. Perhaps it is the partner or parent of the actual borrower. The closer the connection to each other, the easier the borrowing and the repayment. Should there be any discrepancies in the repayment, both credit partners can quickly exchange information and eliminate the discrepancies. In addition, the funding institution has the option of recourse to two people in the event of default.
This should be taken into account with a loan during parental allowance
Taking out a loan to finance purchases for young people is a common method and is therefore practiced on a daily basis. Despite all this, borrowers are still making a lot of mistakes, so we would like to mention a few things here that should definitely be considered.
The loan amount should not be unnecessarily increased, but should be limited to the most important things. Many young parents do not know exactly when two incomes will be available for the family again. Therefore, a loan should only be taken out for the things that are really important.
Furthermore, the credit rate should be set as low as possible. The loan must not become a financial burden and must be easy to integrate into everyday life. On top of that, good protection must take place so that in the event of an emergency there is no risk of over-indebtedness and the young family slips into bankruptcy.