Credit for trainees: how much credit is realistic?

Finding a loan as an apprentice is not easy. First of all, you should check whether you can receive state funding.

Credit Institutions can be a solution for you as soon as you have undergone training that is eligible for funding under the Credit Institutions rules in the past two years. Educational loans are characterized by favorable conditions.

Education credits serve to (partially) compensate for the costs directly related to the training and the living expenses incurred during the training.

A loan taken out on the capital market in addition to educational loans should never serve to cover these expenses. If such a loan is used, the debt trap is not far.

But of course there are investments that cannot be fully financed from current income (training allowance / funding).

Financing a car as an apprentice is sometimes not possible with your own resources. If the parents cannot help, only a loan remains.

Loan for trainees: requirements for award

Loan for trainees: requirements for award

In order to be able to receive a loan for trainees, the usual requirements for all loans must first be met:

  • The applicant must be of legal age.
  • The place of residence is in Germany.
  • There is a checking account with a domestic bank.
  • The trial period has to be over (some banks even require an employment period of at least six months).

Until then, there are probably no problems for many trainees. But now the tricky questions come.

Loan for trainees: possible terms

A condition for a loan is actually the existence of a permanent employment relationship. As a trainee, however, you cannot show that.

An apprenticeship is limited. As a rule, it takes a maximum of four years. Many banks grant loans on temporary contracts, but only with terms that end with or before the time limit.

Assume that your training lasts four years and three years remain at the time you apply for a loan. The maximum term for loans is then 36 months.

If you are about to complete your training, the credit outlook is zero for now. There are practically no installment loans with terms of less than six months.

The solution : try to get a written confirmation from your employer that they will be taken over.

Banks are then more willing to lend. This is especially true for the bank where you have your checking account or for your family’s house bank.

Regular income from student loans

Lack of credit is the main obstacle to lending to trainees.

It goes without saying that the Credit Bureau information must not have any negative characteristics due to unpaid bills.

The creditworthiness is not only based on the Credit Bureau. It’s also about economic performance.

In other words, it depends on what you earn as a trainee.

These are the average monthly training allowances in 2017:

country group Industry and trade craft total
Old federal states 950 USD 743 USD 881 USD
New federal states 878 USD 678 USD 827 USD

Source: Database of the Federal Institute for Vocational Education and Training (BIBB)

The garnishment exemption limit for a person without maintenance obligation is 1,139.99 net. On average, this amount is not achieved in either the old federal states or the new federal states.

On the other hand, trainees no longer earn very badly these days. Whoever earns 950 USD or 878 USD a month is above the household flat rates that many banks use to take into account the ongoing cost of living.

Against this background, some credit institutions are ready to lend to trainees, although a attachable income is not earned. The sound limit is around 700 to 750 USD.

Larger loan amounts are not expected, however. Small loans between $ 1,000 and $ 3,000 are realistic.

For you as an apprentice, the credit options are therefore limited in two ways: by the amount of your monthly net income and by the remaining duration of your training if you are unable to present a certificate of acceptance from your employer.

We want to illustrate this with a few sample calculations.

The effective interest rate should be 5%. This is slightly higher than the current average interest rate, but is still rather cheap given your limited credit rating as a trainee.

The loan amount is 1000 USD:

running time Effective interest rate rate total cost
12 months 5% 85.56 USD 26.68 USD
24 Months 5% 53.82 USD 51.71 USD
36 months 5% 29.92 USD 77.16 USD

The loan amount is 2000 USD:

running time Effective interest rate rate total cost
12 months 5% 171.11 USD 53.36 USD
24 Months 5% 87.64 USD 103.44 USD
36 months 5% 59.84 USD 154.32 USD

The loan amount is 3000 USD:

running time Effective interest rate rate total cost
12 months 5% 256.67 USD 80.84 USD
24 Months 5% 131.47 USD 155.16 USD
36 months 5% 89.76 USD 231.47 USD

The monthly installments decrease as the term increases. But it increases the total cost to the borrower because the loan is repaid more slowly.

Loan for trainees with and without guarantors

Loan for trainees with and without guarantors

The examples illustrate how much credit you can possibly take out on your own. As you can see, the loan options are very limited.

A different picture emerges if you can provide a solvent guarantor or if someone agrees to co-sign the loan agreement.

Close family members will be considered, mostly the parents. Roughly speaking, the credit options then depend on the parents’ creditworthiness.

Above all, it is about the income of the co-signers or the guarantors and their own preloads from existing loans. Your own income then plays a minor role.

Conclusion: With a guarantor or with a co-signer, your credit chances increase enormously. Another question is of course whether you can repay a loan of 5,000 USD or 10,000 USD on your own. That will hardly be the case.

Who grants credit to trainees

Who grants credit to trainees

In principle, as an apprentice, you can submit applications to the same loan providers that provide loans for other professional groups.

However, the chances of success are very different. If you would like to waive a guarantee or co-sign with your parents or other relatives, the options are significantly reduced.

House banks and branch banks

House banks with whom your family has long-standing business relationships will initially be happy to provide you with a checking account.

Together with the checking account, a small credit line may be granted as overdraft facility as soon as regular incoming payments are found for a few months.

A reasonable loan for a car or other small purchases will not be a problem unless you sign the contract with your parents or other relatives. The prerequisite is that the co-signatories have sufficient creditworthiness.

Without co-signing or providing a guarantee, it will be difficult to obtain even a small loan for trainees from house banks or branch banks.

Loans for direct bank trainees

You will find loans for trainees, if only with a few direct banks.

Agree Bank, for example, states that it grants trainees of minor age if the training allowance is at least $ 750 per month. A guarantee or co-signature does not appear to be necessary.

The Intrasavings Bank makes clear in some product descriptions that it grants loans to trainees. However, no further details on the requirements are given.

The Good Finance is also open to loans to trainees. However, an online application seems difficult.

“Trainee” can be entered as a profession, but the form will fail if the apprenticeship has not yet existed for two years because they cannot register a previous employment relationship.

However, you have the option of contacting customer service or chatting.

It is also possible to get advice in a branch and to make an application there. As far as can be seen, the Good Finance requires a co-signer or a guarantor.

Credit comparisons and credit intermediaries

The involvement of a credit broker is the best way to find a cheap online loan that suits the circumstances.

Reputable credit intermediaries have contacts with many partner banks. If the customer makes a loan request, the loan broker submits the cheapest loan offer free of charge and without obligation.

We recommend Cream Bank.

The loan broker is one of the market leaders in its sector in Germany. Perhaps you will know Cream Bank because the company advertises its services a lot in the media.

Cream Bank expressly points out that loans for trainees are possible together with guarantees, and is thereby advertising to work out suitable loan solutions together with the trainee and the guarantor.

Another option is to use a credit comparison. The Best Bank loan calculator works with Agree Bank, Good Finance and the Intrasavings Bank.

A credit request to Best Bank can therefore be successful. Taking advantage of a credit comparison is always more sensible than making individual inquiries at different banks.

Credit comparisons automatically carry out a day-by-day comparison among the offers of their partner banks and deliver their customers the cheapest offer within a few minutes – free of charge and without obligation.

With Best Bank, you only need one application to receive the automatically determined best loan offer.

P2P loans for trainees

P2P loans are loans that are given by private investors through the formal involvement of a bank. The loans from private to private are brokered by so-called credit exchanges.

The market leader in Germany is:

  • The credit exchange explicitly addresses its offer to trainees.
  • At Lite Lender, you as the trainee make the loan request alone. Guarantors or co-signers are not accepted.
  • After you have made a loan request, Lite Lender checks your loan project for conclusiveness and assigns it to a credit rating level. The loan project will then be visible on the platform of the exchange. Private investors can bid on it.
  • Lite Lender will explain in detail how the lending process works.
  • At Lite Lender, trainees have a pretty good chance of getting a smaller loan. However, the effective interest rates will not be low.
  • At Lite Lender, interest rates are based on the credit rating. The credit exchange also receives a commission, which is included in the effective interest rate.
  • You can make a loan request directly with Lite Lender or via Best Bank. Lite Lender participates in Best Bank’s credit comparison.

Special case: finance a car as a trainee

Special case: finance a car as a trainee

Debt financing of a car will be a common application of the loan for trainees. The same requirements apply to a car loan as to any other installment loan. However, trainees are more likely to receive a car loan than a free installment loan. Interest rates can also be cheaper.

The prerequisite is that the vehicle is given as security to the bank (delivery of the vehicle letter). If you can make a down payment for the vehicle, lending will be easier.

Car dealers offer financing from manufacturer banks or independent car banks. Do not close such financing immediately, but compare the conditions with other offers.

In many cases, a loan from the dealer is by no means the cheapest financing option. Follow our recommendation and submit loan applications to Cream Bank or Best Bank. Specify the purpose for which you want to finance a car.

Also ask your family’s house bank about the conditions for vehicle financing.

Short-term and overdraft facility: stay away

Short-term and overdraft facility: stay away

Your bank holding the account may grant you a overdraft facility. Overdraft facilities are used to bridge short-term financial bottlenecks. When it comes to financing purchases, they are more of a makeshift solution. The high interest rates alone prohibit a longer use of the credit line granted. The situation is similar with short-term loans. Mini loans over a few hundred USD from special providers are no problem for trainees with remuneration over 600 USD.

Short-term loans are similarly expensive as overdraft facilities and have to be repaid in one amount within 30 days or 60 days. Depending on the provider, there are a number of additional functions. This includes express payments and the possibility of payment in installments.

All of these additional functions are extremely expensive. For this reason alone, short-term loans for trainees cannot be recommended. Providers of this type of loan will usually only be willing to make very small amounts available to trainees.

The repayment obligation at the end of the short term can become a trap.

Apprentices then suddenly have to raise some 100 USD from a training allowance of perhaps 800 USD. And 30 days are up before you know it.

Credit for trainees: tips

Credit for trainees: tips

Even small amounts can become a cost trap. These tips help prevent the disadvantages of hasty borrowing:

  1. How much credit can I afford? Compare roughly all running costs and your income. The amount that you do not need for budget management is available for loan repayment.
  2. Limit the credit to the bare minimum. Unnecessary loan amounts cause unnecessary costs and reduce creditworthiness for the future.
  3. Guarantors and co-signers are welcome at banks. From the borrower’s point of view, strictly speaking, these are emergency solutions that can lead to the taking out of loan amounts that are actually not manageable.
  4. Specifying the purpose of use can lead to cheaper loan offers. Use the corresponding filter functions for credit comparisons.
  5. Don’t be pressured. Sleeping over a loan offer or comparing it with other offers is always possible. Offers are generally valid for 7 to 14 days. Interest rates do not change overnight.
  6. Pay attention to free special repayments. Premature free repayments are standard today. They allow the reduction of borrowing costs.
  7. Don’t get involved in residual debt insurance. Credit insurance does not improve your credit rating. Instead, they dramatically increase the cost of loans, sometimes by 100%.

Last but not least: credit for trainees without Credit Bureau?

Last but not least: credit for trainees without Credit Bureau?

Occasionally, Credit Bureau-free loans are offered to trainees as a way out if all efforts to obtain a loan have failed.

What is meant by such advice remains in the dark for us. The fact is, there are no loans for apprentices without Credit Bureau.

The loans distributed in Germany without Credit Bureau all come from a bank in Liechtenstein. The bank does not grant any credit broker special conditions. Allocation requirements and credit conditions are always the same.

Loans without Credit Bureau require an existing permanent employment relationship, with a good income beyond the seizure allowance. As a trainee, you cannot show both.

Reputable financial service providers will never offer trainee-free loans to trainees.

Credit for trainees: Offers without guarantor and compared with guarantor

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