Loans for Social Welfare recipients are offered. Unfortunately, loan offers for ALG 2 recipients do not offer an outstanding selection. Comprehensive restrictions must be expected. The article explains more about the credit options and what requirements have to be met.
Loans for Social Welfare recipients – credit options without income
The biggest hurdle at which loans for Social Welfare recipients fail at house banks is income. The level of income is already well below the attachment limit. A normal loan can only be approved if there is sufficient, unencumbered leeway for payment in installments above the seizure allowance. For an individual, the garnishment limit is only reached with a net income of USD 980. If, in addition, dependent persons can be fed from the income, the limit increases significantly.
The initial credit situation is even more problematic due to the type of income. The Social Welfare benefit is not an income that would be eligible for a credit request. A social transfer benefit that is linked to the need of the recipient cannot be pledged or assigned. Social Welfare is therefore unsuitable for credit security. No credit institution or credit intermediary would take the risk of such lending.
In spite of Social Welfare, make the loan eligible
In principle, loans are only possible if adequate credit protection is offered. This security could not be derived from income. Loans for Social Welfare recipients can only be found on the capital market via a small detour. First, the provider has to be changed. Under no circumstances does an ordinary house bank accept such a credit risk. Credit intermediaries, special banks and personal loans remain as possible lenders.
In addition to the change of provider, other preconditions must also be met. First, the Credit bureau must not have an unfinished negative Credit bureau entry. If the Credit bureau is clean, then the lender must be offered usable security. The options are:
– Pledging valuable property security, for example the motor vehicle.
– Entry of a solvent guarantor or co-applicant into loan liability.
– Pledging of old-age provision, provided that it is covered by a capital-building life insurance policy.
The problem with Social Welfare is that often only the guarantee remains as an option. Long-term paid life insurance and valuable items are hardly available in households. A possibly existing vehicle is usually so old that it no longer represents security. In addition, the possible loan volume is very small, despite the collateral provided.
Even small amounts of credit can mean a great relief for the Social Welfare household. Charities and especially the churches can intervene in emergency situations. If such a social loan is granted, it is also interest-free.
Loans for Social Welfare recipients with cash payment are also possible within a modest framework. Pawn shops would be the right contact for this.