calculatorbmi.org

My WordPress Blog

 

For a payday loan application to succeed, the borrower must meet some requirements .

1. Prerequisite for the instant loan: the age

With the right preparation unpleasant surprises can be avoided. The conditions that exist in detail for an instant payday loan may differ depending on the bank. A close look at the terms of the contract is therefore recommended in any case.

1. Prerequisite for the instant payday loan: the age

In Germany, payday loans are generally only given to persons over the age of 18. This already applies to a disposition credit in the checking account. Those who want to take out a payday loan under 18 need the signature of their parents or a guardian. In addition, many banks have an upper age limit . For pensioners over the age of 65, it is not always easy to get a payday loan . Among other things, this is due to the fact that no residual debt insurance can be taken out for older persons. This makes the risk for banks too high even with a higher annuity, since repayment is not guaranteed due to age.

2. Condition: The residence of the borrower

If the payday loan is requested from a bank in Germany, the borrower must also prove that he has permanent residence within the Federal Republic. This also requires a German bank account on which the income is booked. For borrowers domiciled abroad, it would be too costly for the bank, or even impossible, to initiate appropriate enforcement measures. The requirement of a German residence applies also to so-called “Swiss credits” which are awarded without Schufa query.

3. Prerequisite: creditworthiness or creditworthiness

Before banks approve a payday loan, a credit check is always carried out. This is to ensure that the applicant is able to repay the payday loan as agreed. The credit check includes not only an insight into the salary situation but also a query from Schufa or other credit bureaus. This checks whether the payday loan seeker has met his payment obligations in the past. If there are one or more negative entries, this usually always leads to a rejection. Another criterion for the credit rating is the debt ratio. If other credit obligations already exist, this also leads to a reduction in the credit rating.

Credit standing has an impact on costs

The credit rating has an impact not only on lending, but also on the annual percentage rate of charge. More and more banks now offer credit-based interest rates. The higher the income, the cheaper the interest rate will be. The interest margins are partly substantial. Not infrequently, payday loans with an annual percentage rate of between 4.5 and 15 percent are offered. The favorable initial interest rate is reserved for borrowers with a very high income. For persons with a more normal income, it may therefore be better to opt for a payday loan with a credit-independent interest rate.

4. Condition: income for employees

One of the most important prerequisites for lending is a regular income in sufficient amount. The creditworthiness results from the income amount less existing obligations. Employees and civil servants with dependent employment have the advantage that they have a regular income, which can easily be proven. Therefore, they are preferred over self-employed or freelancers in lending. Ideally, the applicant is already employed for a long time by his current employer and has a permanent employment contract.

5. Prerequisite: income of self-employed and freelancers

Self-employed and freelancers do not usually have a consistently high income. This makes lending difficult, but not impossible. There are certainly banks that extend their payday loans to self-employed or self-employed persons. Since self-employed can provide no proof of income, the credit check is more expensive. As a rule, applicants must submit the tax assessments and annual accounts for the last two years. Depending on the payday loan amount and the bank, a business evaluation (BWA) is also required. Often, a forecast of expected future revenues is required. This can be created, for example, from the order books.

6. Prerequisite: The budget of the borrower

Regardless of whether the payday loan is from a worker or self-employed, the bank needs a budget. This includes on the one hand the existing income and on the other the regular expenses such as rent, insurance and living expenses. In order to be granted a payday loan, the bottom line must be enough money to pay the monthly installments. As far as the cost of living is concerned, depending on the size of the household, banks use a specific monthly lump sum. For a Sinlge household this is usually between 650 and 700 euros. For each additional person an amount of 200 Euro will be added. The lump sum is already set for infants, as the costs increase over the years.

7. Condition: collateral of the borrower

Depending on the type of payday loan and the amount of the payday loan, the banks still require additional collateral. This applies in particular to payday loans for vehicle or real estate financing. For example, car payday loans usually require a vehicle registration or registration certificate. Only after complete repayment of the payday loan will this be handed over to the borrower and vehicle owner. In a real estate financing, the bank is registered as a creditor in the groundbreaking.

For smaller payday loans, on the other hand, no special collateral is usually required. Here proof is sufficient that the payday loan installments can be paid from the existing income. However, with additional collateral such as a guarantor or a property, borrowers have the option of increasing their own credit rating. This may result in a cheaper interest rate.

Remaining debt insurance is not a prerequisite for lending

Most banks offer a residual debt insurance to secure their payday loans. If the borrower dies, this will trigger the outstanding payday loan amount. For this purpose, the insurance mostly takes over the monthly installments for a certain period of time for involuntary unemployment or incapacity for work. However, banks must not make lending dependent on the conclusion of a residual debt insurance. If this were the case, then the costs would have to be included in the annual percentage rate. Especially with smaller payday loans, a residual debt insurance can significantly increase the cost of borrowing.

LEAVE A RESPONSE

Your email address will not be published.

You Might Also Like