You work and apply for a loan or a loan, but the bank, to your surprise, refused you. Maybe precisely because you do not have a contract of employment, only you are employed on a mandate contract or a specific task.
Gone are the times that for some banks, only one in 10 applicants passed verification and received a loan. That was even 5-7 years ago. Today, the situation of people looks better. There is a government, wages are rising and unemployment is falling. All this means that applicants in the eyes of the bank perform better, are more reliable. And the bank wants to cooperate with a reliable client, so he agrees to give him a loan or a loan.
It happens, however, that, to his surprise, the applicant, despite the fact that he is working and has a payday, is quite substantial, he gets a refusal from the bank. The type of contract the person concerned has can contribute to this. The best situation is for people working full time.
Stability of employment
It is important for the bank that the potential customer not only shows income in the last three months before submitting the application, but also throughout the loan period. The bank (or other banking institution) must be sure that if the applicant receives a loan, he will be able to pay the installments.
In the case of civil law contracts, which include a mandate contract and a specific task, it happens that the contract, presented by the applicant, applying for a loan, was signed only a few months ago and the cooperation will end soon. However, work continuity is important. It means that the work is not done once, but regularly, for a specific employer, thus the account receipts are also regular, so there should be no problem with paying installments on time.
The employment contract clearly states how much the employee earns. The basic salary rate is provided (minimum wage guarantee). Extras, bonuses, rewards, etc. are also included. The payment is regularly made monthly by the company to the employee’s account. If you have a mandate contract or a specific task, you can include in the contract that the remuneration will be transferred to the employee (and specifically: the contractor) by the company (principal) after completing the work. Thus, sometimes it means that the salary will affect the account after 1.5 months or after 2 months. For a bank, it is better if the remuneration is paid regularly, at regular intervals, just as the deadlines for paying individual installments are fixed than if the employee received a much higher remuneration, but irregularly, eg once a quarter.
Rights arising from the type of contract
Who works full-time is protected by the Labor Code. The employee is entitled, in accordance with the regulations, full paid vacation and paid (usually 80 percent) sick leave. This means that even if the employee is on vacation or on sick leave, he or she receives a salary, so there should be no trouble with timely repayment in installments. In the case of an employee with a civil law contract, there are no such amenities. He gets a salary only for work actually done. If he goes on vacation, it is often unpaid leave or takes time off between orders: when one contract has just ended, and the next one he will sign. Lack of income, even for a month, may contribute to the fact that installments would be delayed, which is a minus in the eyes of the bank.
Protection against contract termination
A full-time employee is protected from losing his job overnight (the exception is disciplinary dismissal – the famous Article 52 of the Labor Code, concerning the termination of an employment contract without notice, due to the employee’s fault). A full-time employee has a certain notice period. The length of this period depends on the employee’s internship. If it is a contract for a definite or indefinite period, eg he has worked for less than six months, he is entitled to a 2-week notice period. In turn, if he worked for at least 3 years, his termination will be 3 months. Whether an employee is entitled to a notice period and, if so, how long is important for the bank that verifies the customer applying for a loan.
If an employee loses his current employment and is entitled to three months’ notice, there is a good chance that he will pay the loan installments on time and also finds new employment during this time. In the situation of a person employed, for example, on a commission contract or for a specific task, sudden loss of job, and, as a result, also income, may cause that the financial liquidity of such a client will be strongly upset, thus there will be a problem with paying installments.