The birth of a child carries a lot of responsibility, also in financial terms. Apart from the costs that a new citizen of the earth entails, existing loans must continue to be financed. This can lead to sensitive restrictions, as the parental allowance only covers part of the previous gross salary. Nevertheless, parental leave is not necessarily synonymous with a Lent.
But what possibilities are behind the offers of credit during parental leave? Our guide to the subject of credit during parental leave tells it!
1. How is parental leave regulated?
Legislators have not yet given a precise definition of what parental leave actually is. The employer is obliged to agree to parental leave. This time is given to both parents to look after the education of the child. Parental leave is available to all persons who have been granted the right to personal care. This means that the biological parents, the adoptive parents, the grandparents and foster parents are entitled to parental leave.
Also, when one lives with children from previous relationships, there is theoretically a right to parental leave. In principle, a right to parental leave can be checked at the moment when a child, who is not yet three years old, lives in the household. However, if no personal right exists, the consent of a guardian must be given.
To make the parental leave, there are several possibilities. It applies that the parents have a right to parental leave until the child’s third birthday. This can be shortened to two years to then take up to the age of eight again twelve months parental leave. Both parents are also entitled to use this time as long as 36 months are not exceeded in total.
The employer is obliged to indemnify the employee for these times. However, this requires that parental leave is used for the education of the child and not for further education measures full time. If necessary, both parents should be provided with parental leave planning before the start of parental leave. This serves as a guide, but may be further adapted over time.
By way of example, some parental leave models are listed below:
- Both parents stay at home in the first year of their life and share the remaining twelve months with each other in order to cover, for example, the holiday periods of kindergartens.
- Only one parent takes the full 36 months parental leave in the first three years.
- Both parents each take 18 months parental leave consecutively.
- One parent takes two years parental leave and the other parent splits the twelve months within that time. Here, for reasons of fairness, the employer should be included in the planning, as this, depending on the job, can bring a huge organizational effort.
In this calculation, the eight weeks maternity leave after the birth and possibly the paid special leave for the father must not be forgotten. The best way to do this is to ask the company’s works council or external advice centers. References to this can be found in tariff and employment contracts.
Both parents and other persons who have been granted the right to personal custody may take parental leave as long as they share the housekeeping with the child. The parental leave period is 36 months. How the parental leave is designed exactly, is at the discretion of the parents.
2. What happens to existing loans?
If you look at the classic family picture we have a father, mother, child, a house with a garden and a car. But this idyll has also brought some investment in advance. For the house with garden, most will have taken out a loan.
Since 01.01.2013 there is a new regulation in matters of parental allowance. Thereafter, monthly can be obtained from 300 to 1,800 euros parental allowance. The amount of this money is calculated based on the gross salary of the last twelve months before the birth of the child. How high the parental allowance is exactly can be calculated with the help of so-called parental allowance calculators, among others on the homepage of the Federal Ministry for Family Affairs, Senior Citizens, Women and Youth.
In the case of young couples in particular, it is possible in advance to arrange the repayment installments flexibly. With special repayments, most credit providers are having a hard time, but a temporary reduction in monthly installments is already taken into account in most cases. Common sense already suggests that a young couple building a house sooner or later starts a family with children. In most cases, then a salary will be eliminated.
Nowadays, most families have included the work of both parents in their financial planning. In order to be able to serve loans, although short payment reductions are planned during parental leave, in the longer term both parents are required to work. This will be made possible thanks to daycare and all-day care facilities.
But often the theory fails in practice and other care options in the form of private full-time mothers must be claimed. The additional costs are only partly supported and thus, despite meticulous planning, payment defaults can occur. Here, the conversation with the lender should be sought early. There is a mutual interest in the borrower’s ability to meet its obligations.
Short-term defaults are often tolerated
If necessary, the bank will even engage in debt restructuring. However, speculating on this is a bit short-sighted. With a rescheduling that takes place in the interest of the borrower, the lender inevitably incurs losses. One’s pleasure, the other’s frustration. It is more likely that the repayments will be deferred for a certain period of time and only monthly interest payments will have to be made.
3. Can new loans be completed?
The birth of a child is beautiful and not only with a lot of emotions, but also as many costs. It is necessary to buy strollers, child car seats, baby cots, changing tables and baby clothes. In addition, there is the new car, as in the big city runabout course, not the stroller, the diaper bag and the child car seat fit.
To say it in the words of Jupp Schmitz and Kurt Feltz: “Who should pay for it? Who has so much money?… “There is often only the small loan. However, the question arises as to whether the creditworthiness of the parents for a small loan is sufficient. After all, only one parent may receive full salary during this time. The other parent receives only the parental allowance mentioned above, which means in each case an incision. Also, plus the child benefit of 184 to 215 euros per child, depending on the number of children, the monthly income is below the salary payments of recent months.
If enough reserves have been built in the past to finance much of the new acquisition, the lender will be more easily convinced of the repayment morale and provide a microcredit. The loan term will probably not exceed the 14 months in which the parental allowance is paid.
If the sole earner stands well with his salary, a real estate loan in the form of a long-term loan is of course also granted to newly-baked parents. The only thing that counts is the fact that the loan must be paid off at the end of the term. Whether he is paid by one or more people, the lender does not care. Otherwise, in the last 50 years, when it was a good thing that the woman at home would not be in the home, there would have been no real estate loans.
Creditworthiness does not depend on parenting but on payment behavior. Therefore, loans can also be taken out during parental leave, as long as the lender gives the parents sufficient credit ratings.
4. Conclusion: You can also consume during parental leave
Of course, at this point can not be generalized. It is possible that due to the reduced income, parents will not be granted loans during parental leave. If the money for the purchase of the initial equipment is used, there is help from the state.
Even earners are basically able to finance a family and a loan. Otherwise, the classic family picture would not have existed for so long. Nevertheless, more and more young families are using the salaries of both parents in their financial planning. Conversely, this means that parents have to return to work after their parental leave has expired.
How the financial support of state and employer looks exactly there, can be read more in the brochures of the Federal Ministry of Family Affairs, Senior Citizens, Women and Youth. In addition, counseling sessions are also offered in person or over the phone.
The birth of a child does not mean the loss of a financial perspective or the end of consumption. If only because consumption promotes the economy, the state is also interested in promoting the economic and consumer capacity of young families.