Background: loans during the probationary period

The moment when a loan from a bank or a credit broker becomes necessary cannot always be determined in advance. Taking out a loan is not always planned well ahead. Especially after a job change or when starting a new employment relationship, it can be difficult for an employee to obtain a new loan, because many banks and lending institutions refuse to grant loans during the probationary period. This is due to the employee’s ease of dismissal during the probationary period, so that no job security can be guaranteed. Thus the borrower or applicant—even with a good salary or income and an open-ended employment contract—may fall outside the lender’s criteria and cannot obtain a loan during the probationary period, because the minimal guarantees for the bank are considered too risky. There must also be no negative entry in the Schufa. Such an entry will not help the borrower obtain a loan during probation. As long as the borrower is in the probationary period, it is therefore difficult to obtain a loan each month even with a high income. Even if the income suggests that the borrower can reliably repay the monthly installments, the bank still lacks additional security. Nevertheless, there are various possibilities to obtain a loan even if the borrower is still in the probationary period with the new employer.

Getting loans during probation approved with collateral

A good way to get a loan approved by a bank even during the probationary period is to provide collateral. Such collateral improves the borrower’s creditworthiness during the probationary period with the new employer and reduces the risk for the bank. However, it is important to distinguish between different types of collateral, since lenders may not accept all forms of collateral in such cases. A distinction is made between tangible (asset-backed) collateral and personal collateral. Tangible collateral includes, for example, existing plots of land or real estate or various long-term financial assets such as life insurance policies or building savings contracts. Although these can be used to secure many types of financing, they are not common for loans during the probationary period and may not be accepted. Because the probability of default for a borrower in the probationary period is extremely high, banks and lending institutions in these cases prefer collateral that can be monetized without much effort. As a rule, the only security typically accepted during probation is a guarantee. A guarantee represents the highest possible security for a lending institution, because the loan can continue to be serviced even in the event of the borrower’s dismissal and the bank need not fear losses. The borrower’s creditworthiness is thus effectively improved. In a guarantee, another person—usually from the borrower’s circle of friends or family—is added as a guarantor to the loan agreement. It is especially important that the guarantor meets certain criteria. First, they must of course be in their own open-ended employment and otherwise creditworthy. Entries in the Schufa may be a direct obstacle here. In the event of a payment default by the primary borrower, the guarantor must take over the outstanding payments for the loan and can be held fully liable in the case of insolvency or inability to pay by the borrower. In the worst case, the guarantor may therefore have to repay the loan out of their own pocket. For this reason, the borrower should only seek guarantors who have sufficient trust in them and their ability to repay.

Loans during probation from private providers

An alternative to banks and credit brokers, especially during the probationary period, are loans from private individuals. Two different options can be distinguished here. On the one hand, a private loan from the immediate personal circle, and on the other hand, a private loan from a lender organized via an online platform. However, when in the probationary period you must look carefully at online platforms and search for a suitable one. This is because these intermediaries typically check customers before they can post their loan request on the site. The modalities of the checks vary from platform to platform. While some platforms require only the last three payslips, others often also request a copy of the employment contract. Such requests should of course be avoided in the case of a probationary period, since activation would likely be denied because of the probation. If the borrower is approved, they can post their loan request on these platforms. They are then completely flexible in the amount, the term (and the associated monthly installments), and the interest rate of the loan. Generally, the better the offer for a potential lender, the more likely it is to get a loan approved during probation. In addition to the points mentioned above, the borrower can include significantly more information in their request to gain the trust of potential lenders and increase transparency. By describing the financial situation and the reasons for the loan, the impression of a well-organized and structured borrower can be quickly created, which can often be decisive for lenders’ decisions. The major disadvantage of these online platforms, however, is often the long waiting time until a loan can be granted. Due to customer checks and often slow decisions by potential lenders, several weeks can pass before a loan is issued.

A private loan is usually quick and easy to arrange. If the borrower finds a sufficiently solvent private lender, the terms of the loan can be negotiated quickly and directly. It is even possible to achieve financial freedom within a few hours, since such a loan can be granted and disbursed quickly. However, even with a loan among friends it is important to draw up a proper loan agreement. This protects both parties and helps avoid disputes related to the loan. A loan agreement should explicitly contain the most important details. These include, in addition to the names of the parties involved, the loan amount and the agreed interest rate on that amount. The agreed repayment date and the agreed method of repayment should also be included in such a contract. This ensures that there are no contentious points even among friends, because all information is clearly and unambiguously fixed in the loan agreement. Even during the probationary period at a new employer, you do not necessarily have to forgo a loan. Although many options to obtain a loan are reduced during this time, with an appropriate income it is possible to obtain a loan. The decisive factor in choosing the method is primarily the urgency of the required amount, since the time until disbursement can be significant for some types of loans.