Ongoing debt collection is one of the more adverse circumstances when it comes to lending. The amount of money available monthly is often severely curtailed by the current obligations, which has a negative impact on the applicant’s creditworthiness. But there are still ways to apply for a loan despite collection.
Credit despite collection from the perspective of the banks
Debt collection procedures are usually initiated when open invoices have not been paid for a long period of time and also reminders could not change this. For this, the trader sells his claims to a collection agency, which in turn assumes the collection of the outstanding amounts. Once it has come to that, higher fees are due, for which debt collection agencies are well known. Fees and debt repayments are a not inconsiderable item in monthly expenses and, at the latest, the associated costs affect the creditworthiness of the bank customer who is about to apply for a loan.
For it is the current inflows and outflows in the applicant’s account that banks attach particular importance to when assessing. If the balance of the two shows that there are already enough charges, a loan will be rejected. It is therefore a common question in such cases, how to get a loan despite debt collection.
Incidentally, an ongoing debt collection procedure does not affect the information provided by credit bureau, as it is only informed if the debtor agrees to it or if the entry is intended to warn third parties against entering into transactions with the debtor. A collection procedure can thus lead to a credit bureau entry, but does not have to. The borrower will be notified of the transaction in any case.
Additional security by guarantor and co-applicants
The easiest way to get a loan despite collection, lies in the help of the circle of acquaintances and relatives. Because if someone is willing to take on a guarantee, this significantly increases the chances of getting a loan. A guarantor guarantees that the debt service is provided on time, regularly and in full. If this is not the case at any time during the term, he has to step in and take over interest and principal payments. For this it is of course necessary that the guarantor brings exactly the conditions required by the participating bank. Accordingly, no credit debts may exist with the guarantor, unless he has a sufficiently high income. This income should be generated from employment and, if possible, not on a fixed-term basis, depending on the duration of the loan.
Incidentally, the same conditions apply to co-applicants. The difference to the guarantor is that the co-applicant is liable from the outset and therefore directly involved in the fulfillment of the claims resulting from the loan. If all the requirements are met, there is practically nothing in the way of the loan despite debt collection.