Every month thousands of Social Welfare recipients search for loans on the Internet. You will find it at first glance. Under the relevant search terms, you will find a number of websites that offer loans for Social Welfare recipients. On closer inspection, however, disillusionment sets in. And Social Welfare recipients should take a close look, so that they do not fool unsound traders.
Anyone who takes a closer look at the offers on the relevant websites will quickly find out: Either it is credit recommendations that require a guarantor or a co-signer. These are the harmless cases. The loans themselves are mostly reputable. Or there are bogus offers in the gray area for crime. If you get involved with such dubious dealers, you may gain experience, but you won’t get a loan on reasonably affordable terms.
Often these traders are only targeting their victims’ money. They charge upfront costs without being able to provide a financial service. Sometimes they are address dealers. Or they want to bring some financial products or insurance to the market.
If a loan is actually arranged in rare exceptional cases, this only happens after insurance has been taken out and at exorbitant interest. If you are looking for a loan as a Social Welfare recipient, be very careful. Many putate credit providers are trying to use your financial hardship in favor of semi-silk businesses. Be realistic and don’t be fooled by the alleged posite customer reviews that you can find on some websites.
Loan from the job center
The best and often the only way for Social Welfare recipients to get a loan is the interest-free loan from the job center. The conditions for granting loans are regulated in the second book of the Social Code (Section 2 SGB II) As a rule, these are small loans for amounts between USD 100 and USD 00. You will be returned in small installments.
The loans from the job center are earmarked and require a certain emergency or an unavoidable need. Both have to be proven. The lending itself is at the discretion of the responsible clerk. Loans from the job center are granted, for example, for heating costs and electricity costs if there is otherwise a risk of the energy supply being switched off.
Rental deposits or inevitable repairs to the house you le in can also be financed with funds from the job center. An application is always required to recee the loans. Appropriate forms are sometimes available in the job centers. Here is a sample application for a loan despite Social Welfare: First choose the usual letterhead with name and address as well as the date of the application.
In addition to small loans, Social Welfare recipients can recee a so-called entry fee if self-employment is planned. The granting of this integration assistance is at the discretion of the authority. Entry fee is not easy to get.
First of all, there is a mediation priority. Before dealing with start-up grants, the clerk will first try to get his clients into an appropriate employment relationship. The applicant must also convince his clerk of the seriousness and prospects of success of the planned independence. This is done with a detailed written description of the planned project, with business plans, liquidity plans and profitability forecasts.
The clerk will expect proof of professional qualifications and a certificate of sustainability in the form of an expert opinion.
Bank loans at Social Welfare?
Which bank grants loans despite Social Welfare? The answer is: no bank does this. Recipients of unemployment benefit II have no income that can be seized. The payments are too low. A garnishment can also be prevented by setting up a garnishment protection account. It is therefore not possible to assign income claims. However, assignments of wages are often the only security for the mass business “consumer loans”.
What does it look like when special collateral can be provided? Usually not better at all. Real estate, securities or insurance contracts such as prate pensions or life insurance – recovery in the event of a disruption in performance always means a special effort for banks.
If such collateral is placed alongside assignments of wages, banks sometimes grant better credit terms. If the borrower does not pay, the assignment of wages is used first. It is easy. Additional collateral represents an additional reduction in the credit default risk. However, recourse is usually not necessary. This only happens in a few emergencies.
With loans for Social Welfare recipients, on the other hand, the costly realization of collateral would be the only way if the borrower no longer fulfills his obligations. In addition, Social Welfare recipients regularly only want to take out a small loan that they believe they can repay. But then the possible effort associated with the utilization of the security is disproportionate to the income. What does it look like if there is income from a part-time job in addition to Social Welfare ?
Due to the crediting regulations, the additional income associated with a part-time job will not be sufficient to get a loan from banks for peace. This also applies to short-term loans from special providers.
The way out: loan with guarantee
Most banks will decline if Social Welfare offers recipients guarantees. Credit intermediaries like Best Bank, on the other hand, seem to accept guarantees in such cases.
Best Bank does not broker a loan without a surety for Social Welfare recipients. In reality, however, it is usually not a question of guarantees, but of a second borrower. This or the guarantor must meet all creditworthiness requirements that are required by the guidelines of the lending bank.
In practice, close relates or friends are usually considered as guarantors or as co-signers of a loan agreement. Anyone entering into a loan with a Social Welfare recipient must be aware of the risk. Utilization is definitely possible. Guarantees and co-signers are also entered in the Credit Bureau file. As long as all obligations are fulfilled, the Credit Bureau entry is neutral.
However, before entries of this type can have a negate impact on creditworthiness if guarantors and co-signers want to take out a loan themselves. In our opinion, the way out via guarantors or co-signers is not the optimal solution. The credit conditions are often better if the Social Welfare recipient does not appear at all. Therefore, in many cases it makes more sense to let the friend or relate designated as co-signer or guarantor take out the loan alone. Repayment modalities can be determined by an internal agreement.