Cars have long been used objects. Many employers require that their employees have a driver’s license and a vehicle in order to be able to use them flexibly. But only a few can afford a car without financing. However, bank loans are tied to criteria that the applicant must meet. It can be problematic if only a temporary employment contract can be submitted for the application for a car loan.
Temporary employment contracts are often problematic
A car loan is called a dedicated loan because the money is made available solely for the borrower to finance a car. If only a temporary employment contract can be presented as collateral for a car loan, the application will not be approved by many banks, because they will then see problems in repaying the loan. If the term of the loan is chosen so that it can be repaid within the term of the temporary employment contract, the installments are so high that they can rarely be paid and the salary exceeds them. If the rates are chosen to be lower, the term is extended and extends beyond the period of the employment contract. However, repayment is at risk.
Additional collateral is needed
If only a temporary employment contract can be presented for the car loan, further collateral should be given to the bank. These do not have to have the value of the total loan amount, because the vehicle itself, which is financed by this loan, also has a value. The bank can therefore keep the car and has security for the loan as long. It is therefore sufficient to offer the bank collateral for the remaining amount, which is calculated from the interest, processing fee and depreciation of the car.
In order for the bank to recognize the car as security, comprehensive insurance is absolutely necessary. Furthermore, the vehicle must not be too old or have an excessively high mileage, since these vehicles can be expected to carry out higher repairs, which will also burden the borrower.
Other criteria, such as information from Credit Bureau, must be in order for the bank to be able to be convinced at all of a car loan if there is only a temporary employment contract. If there are also problems here, the bank will probably reject the loan application.
A guarantor can help
For example, a surety can be named as security. However, only someone who meets the creditworthiness criteria of the bank and can be accepted by it can act as a guarantor. The partner who does not work for half a day or for a limited period cannot act as a guarantor. A surety does not necessarily have to be a family member. In principle, everyone can vouch for someone else. With a car loan, the guarantor does not have to declare his willingness to guarantee the entire loan amount.
It is sufficient if the guarantor guarantees the difference between the real value and the loan amount. The possible burden for the guarantor is therefore manageable. This makes it easier for the applicant to find someone who vouches for them. With a good guarantor, banks are much quicker to approve a car loan even with a temporary employment contract.