Sickness benefit is one of the wage replacement benefits and is not attachable. A reason for the bank to refuse a loan. However, exceptions here confirm the rule. The bank assumes that those who receive sick pay for six weeks are seriously ill. Neither the loan seeker nor the bank knows what the prospects are after receiving sickness benefit. However, if the loan seeker has an illness where it is foreseeable that it will heal after six weeks, one thinks of a broken bone, a loan with sick pay can be approved.
Sickness benefit loan – the prospects
Six weeks of sick pay shows that the loan seeker has a serious illness. Very few people know what will happen after the six weeks of moving in. The bank also knows this and refuses a loan with sick pay. If it is a very serious illness, unemployment or the disability pension can end at the end of sickness benefit. These two benefits are significantly lower than your previous income. How can the customer then pay the installments of a loan with sick pay is the question of the bank.
The customer should know that sick pay is not a seizable income, it is a social benefit. Here, too, the bank cannot access if there is a loan default. As the banks also know, sickness benefit is considerably lower than previous income. Banks do not consider this to be creditworthy. In addition, the employee can also receive the dismissal when receiving sickness benefits. Banks see several reasons why sickness credit is not approved.
The situation is different when the customer receives sick pay but there are still ongoing liabilities to be made. The bank will not do anything here as long as the customer can properly service these liabilities. The bank is behaving so rigidly because it has some borrowers who are unable to pay their debts due to the situation described above. There is often a demand for a payment deferral.
If it is foreseeable that installments can no longer be paid, the borrower should react quickly. A conversation with the bank will show both of them a way out. After all, the bank is interested in the money it lent.
The loan with sick pay from the dealer
If there are urgent purchases, the customer can look around in the trade. These loans are not subject to such a strict credit check. If the credit requirement is not so high, it is sufficient to mention the employer and the credit is approved. Because those who receive sick pay also have an employer. Neither the customer nor the dealer knows how long the revenue will flow properly.
Therefore, it should be a request of the customer that they do not overdo it. It certainly doesn’t have to be the American fridge in the current situation that makes such great ice cubes. If the old refrigerator is still functional, it should still be used until the customer’s financial situation has recovered.
Mail order is also cooperative. If the customer is an existing customer there, he can receive a loan up to a certain amount. Of course not in cash, but with products. Even with a car loan, dealer banks are generous. Especially those who are known to dealers or dealer banks and have a good reputation have great opportunities to get a car loan. However, a loan with sickness benefits and cash payments will be more difficult.
The overdraft facility and credit protection
Sickness benefit credit could also affect the overdraft facility. If the washing machine is defective or the freezer, these purchases could well be paid with the overdraft facility. If the customer also receives sickness benefit, he is likely to have his overdraft facility before receiving sickness benefit. If he had now earned 2,000 USD net, the bank could have provided him with a overdraft facility of 9,000 USD. With this amount, some purchases can be made.
But as easy as it is to use the overdraft facility, the customer can quickly fall into a debt trap. Especially in his somewhat tense financial situation, where nobody knows what comes after receiving sickness benefit, the customer should handle his finances carefully. The overdraft facility is an expensive loan, it has an interest rate level in the double-digit range. If it is used beyond the credit line, interest accrues again. If the customer now leaves nothing to return the overdraft facility, the total will add up until the salary no longer covers the overdraft facility.
An installment loan should then be taken out at the latest, but this is not easy in the customer’s situation. If he no longer receives money from his bank because the overdraft is hopelessly overdrawn, the customer should think about securing a loan. Banks are more willing to grant a loan with sick pay if, for example, a second borrower or a guarantor can be named.
This version of credit protection makes sense for customers who do not want to mortgage the house and yard to the bank by using their property as a pledge. As a second borrower, the spouse or friend could also sign the loan agreement. However, both borrowers are then obliged to repay the loan.
If you can name a guarantor, you should ask around your relatives or friends. Often parents, grandparents or, conversely, children or grandchildren act as guarantors. However, it must be ensured that the guarantor is solvent. That is a sufficiently high income, a clean Credit Bureau and a permanent job. It is not possible for a guarantor to join the loan agreement and have no income. The guarantee is therefore considered immoral.
The guarantor must also be fully informed about the guarantee. He must know that his own credit rating suffers because the guarantee is entered in the Credit Bureau. In addition, he must be able to pay the installments in the event of a loan default.