What is important when borrowing while receiving parental benefit?
- Fundamentals of parental leave and parental allowance
- Special features of borrowing during parental leave
- Tips: credit despite parental leave
- Borrowing while still pregnant
- Current credit and pregnancy or parental leave
Fundamentals of parental leave and parental allowance
The birth of a child is an exciting time for a family. Everything changes and you want to be there when the baby gets to know the world. In order for working people to take care of their baby, the state has set up the parental allowance, which is paid in the first 14th baby months under certain conditions and according to certain regulations:
- biological or adoptive parents and, in exceptional cases, relatives up to the 3rd degree (i.e. grandparents or siblings)
- In addition to normal employees, civil servants, the self-employed, students, trainees or unemployed are also eligible to receive,
- who look after the child themselves, do not work more than 30 hours a week, live with the children in a household and have their place of residence or habitual residence in Germany
The calculation is based on the parental allowance based on the last average net income. Depending on income, it is 65 to 67 percent of it. For low earners, it can be up to 100 percent. At least 300 USD and a maximum of 1,800 USD. Parents can share the 14 months parental benefit entitlement (one parent can receive a maximum of 12 months parental benefit). For single parents or if both parents take parental leave at the same time (partner months), then two more months are paid.
Special features of borrowing during parental leave
Those who are on parental leave also enjoy protection against dismissal set up by law. Also eight weeks before or for women from the time the employer informed them about the pregnancy. In exceptional cases, protection against unfair dismissal can only be loosened by the authorities – for example, if small businesses are threatened by the existence of parental leave. Incidentally, protection against dismissal does not apply in the event of serious breaches of contract by the employee or criminal acts to the disadvantage of the employer.
After the end of parental leave and maternity leave, the normal dismissal rules apply again.
Since parental allowance and child benefit do not represent income in the sense of credit security but are state transfer payments, certain special features apply to borrowing during parental leave:
- Small loans up to 5,000 USD are usually granted without any additional collateral without any additional security if the corresponding income stipulates a valid employment contract before and then in the future after parental leave
- In addition (for real estate financing, for example), the partner who is not a parent must have a correspondingly high income and act as the sole or joint borrower
- if the parent is a single parent during parental leave, depending on the amount of income to date, a guarantor will be required (e.g. the parents)
Tips: credit despite parental leave
- First of all, of course, the credit needs should be checked carefully: Is the purchase really necessary and can the new grandparents also be able to participate? Original equipment for the baby and possibly also renovation work will surely swallow a lot of money – but maybe it will do a number smaller or barely used second-hand goods.
- Also for the benefit of the baby during parental leave should not be financed at the limit, but with enough air for unforeseen expenses – so rather increase the loan term somewhat and thus lower the rates.
- If possible, free special repayments should be arranged so that after parental leave – if the normal salary is available again – you can pay off more quickly. With a decreasing loan term, the interest costs decrease and the Credit Bureau entry is also deleted.
- Banks also like to see life insurance or real estate as collateral and can lower interest rates.
- Compare different offers (for example from direct banks on the Internet and also your house bank) and ultimately decide not only on the most attractive addition, but also on the amount of credit (for example, said special repayment options or the possibility of installment breaks)
- For smaller expenses, it is better not to use the seductive overdraft facility on the current account or to use it for only a few days. Due to the often considerable interest rates, even a small loan at far cheaper interest rates may be worthwhile.
Borrowing while still pregnant
Those who take out the loan online during their pregnancy still have their normal proof of salary available and do not have to complicate the loan process. Pregnancy does not have to be specified when borrowing or can be kept secret. Furthermore, the household bill that the bank makes is cheaper because less expenses are calculated than with a baby.
One should pay less attention to the conscience of the loan during pregnancy, but rather the cool calculation of the regular income and forecast expenditure when the baby is finally there and after parental leave the parental leave is running. If they give the green light for financing with credit with sufficient buffer, you should not be afraid to apply for and take out the loan.
Current credit and pregnancy or parental leave
If a loan is in danger of pregnancy due to pregnancy and a corresponding loss of income during parental leave, that the loan installments can no longer be paid, a discussion with the lending bank should always be sought in good time. If the bank advisor is unable to help you again, kindly ask for a conversation with his or her boss.
Basically, the bank is interested in an amicable settlement. Don’t let the worst come to the worst, since you can no longer pay the installments and the loan will be canceled. Possibilities for a solution would be, for example, a deferral of the loan, a debt rescheduling or an increase in the term of the loan with the resulting lower rates.