Anyone who wants to take out a loan must fulfill all the usual formal requirements – even for a loan with children. First, the banks as lenders presuppose that the applicant is of legal age and resides in Germany. In addition, it is necessary to be able to prove employment with an employer that has existed for at least six months.
Credit with children – alimony and child support
If these conditions are met, the bank will require proof of the applicant’s income and liabilities. This information enables the bank to assess the economic situation of the claimant – this should be in a presentable relation to the desired amount of credit. The income of the applicant is the amount he regularly earns from self-employment or self-employment.
In the case of a loan with children, the regular receipt of child support or allowance for the children does not increase the income of the applicant – even if this may indeed be the case, in particular for several children. In view of the fact that maintenance payments can be suspended by the debtor with or without cause, the debtor may die, or other reasons can justify the non-payment, banks do not include alimony for their own income: not even if the maintenance payment has been very long and demonstrable flows regularly.
The same applies to the payment of child allowance, which is due to the claimant – as far as he or she is legally entitled – but can be eliminated as quickly as the maintenance payments. It is not uncommon for children to move from mother to father, or vice versa, following the separation of parents. Since the child benefits from the child’s regular stay, the amount can quickly disappear – with the result that the regular repayment of the loan may no longer be guaranteed.
Credit with children – liabilities
A loan with children is also reflected in liabilities (including other existing loans) that the claimant has. For here, lump sums for the livelihood of all persons living in the household are included, which also take the children into account.
A small consolation: An adult child could, as far as it has a corresponding income, as a guarantor for the repayment of the loan liable, or as a co-applicant / 2. Borrowers are recorded in the loan / loan agreement – with the same rights and obligations as the 1st borrower. In the event that installment payments fail to materialize, the bank will usually have a choice: they can choose who they ask for payment from.
Overall, however, two borrowers increase the likelihood that the loan contract will come about and the loan will be granted: the risk that the borrower will default over the long period in which the loan must be repaid is split between two persons and will be cut by half for the bank.
However, regardless of the number of counterparties, the Bank concludes by examining very carefully whether and to what extent the economic situation of the applicant (s) allows the installment payment (plus interest and other costs) corresponding to the loan amount to be paid on a regular basis until final repayment. If there is a mismatch, either the loan amount must be adjusted downwards or the bank rejects the application.
The credit bureau information – often tipping the scales
After all, credit bureau’s information is often the tip of the balance: Here, the bank will receive information / assessments regarding the applicant’s past and future payment behavior – if this information is negative, the loan application is usually rejected. If there are risks that are still sustainable, the bank reacts with a corresponding change in its terms. Higher interest rates and, possibly, the obligation to take out a residual debt insurance guarantee a corresponding reduction in the risk.
How the Bank handles the individual application is, however, at its discretion.