The lending guidelines of most credit institutions stipulate regular income above the garnishment limit and positive Credit Bureau information. Credit Bureau stores all financial commitments entered into by private individuals and companies. All contracts with installment payment agreements, mobile phone contracts and loans are registered at Credit Bureau.
If everything goes smoothly and the customer meets all his payment obligations properly, he usually receives positive Credit Bureau information. However, it is unfortunately not uncommon that people, particularly due to the loss of their job, may or may not be able to meet their payment obligations to a sufficient extent, perhaps only temporarily.
In such a situation, an installment payment agreement that has stalled once can lead to negative Credit Bureau information and thus to loss of creditworthiness. In such a situation, it would often be necessary to grant a loan in order to be able to pay off the accumulated debts. In Germany, unemployment benefit I recipients still have relatively good chances of getting a loan, especially if they earned well before unemployment began.
The amount of unemployment benefit I depends on the amount of the last salary payments received and is therefore still above the garnishment limit. On the other hand, receiving a loan is almost impossible for recipients of unemployment benefit II, colloquially Social Welfare. Benefits under the Social Welfare legislation are based solely on the absolute subsistence level and are therefore not attachable.
Is it even possible for unemployed people to have a loan despite a Credit Bureau entry?
It is already difficult for unemployed people to get a loan from one of the usual credit institutions, especially if they are already in Social Welfare. If there is a negative Credit Bureau information in addition to unemployment, even if it is only due to a broken mobile phone contract, the likelihood of receiving a loan is negligible. Very few banks grant a loan to the unemployed despite a Credit Bureau entry. Special attention is then paid to the existence of other collateral, such as life insurance or real estate.
The provision of a guarantor in orderly financial circumstances has also proven to be advantageous here on several occasions. A surety vouches for the creditworthiness of the customer with his assets and must bear the costs incurred in the event of damage. A credit for unemployed people despite a Credit Bureau entry is usually agreed without Credit Bureau upon approval.
This means that the credit institution does not take the Credit Bureau information into account in the loan agreement and does not enter the credit in it. The debtor is therefore able to settle his debts, which led to the negative Credit Bureau information, and appears again as creditworthy due to the non-entry of the new loan with Credit Bureau.
Loans of this type are offered by various providers at an interest rate between 4.9% APR and 16.9% APR. This means that the interest rates are slightly higher than normal loans from large banks noted by Credit Bureau. The usual lending rates for large banks are 3.99% to 12.99%. It is also important to note that the credit line for the first grant is a maximum of 3500 USD. If everything goes smoothly when the loan is repaid, higher amounts are also possible for later loans.
A loan for the unemployed despite a Credit Bureau entry can therefore be highly beneficial for the borrower and his creditors. It is particularly important, however, that the borrower, particularly if the new loan was obtained through a guarantor, now deals extremely responsibly with his financial situation. If the debtor does not meet his payment obligations, a loan without Credit Bureau is also reported to Credit Bureau.
Of course, there is also hope that unemployment is only temporary and that the debtor can meet all of his payment obligations in a short time after a short time. In any case, it is clear that, despite Credit Bureau, a loan for the unemployed is often even urgently needed in order to be able to properly meet all payment obligations.