The possibility of assigning salaries is part of the security of every lender, which is why they usually always have to be approved by the borrower. A loan without a salary assignment is rather uncommon in banking, because the salary and wage assignment allows the bank to seize the borrower’s income independently if the installment payments fail.
If the borrower is unabale to pay
This means that if the borrower is no longer willing to pay the installments for some unknown reason, the bank can seize these directly through the employer. This garnishment is valid until the entire debt to the bank has been paid again, which means that possible fees and the costs from the interest burden are included in the garnishable income. The assignment of salary assignment is usually found in every loan agreement, exceptions are very rare, since the bank would otherwise voluntarily forego important security.
The loan without assignment of salary is much more likely to be found in the private sector, since it is very difficult for private individuals to pledge the income of another private individual. In this case, settlement is usually always carried out by the courts, at least in Germany, which is why a direct attachment by the lender, provided that the lender is a private individual, cannot take place. Since a borrower, at least in the ideal situation, takes out a loan in order to actually repay it, the assignment of wage and salary assignment does not play a major role for most candidates.
Take out a loan with assignment
The situation is even different if a borrower wants to take out another loan but a credit transfer procedure has already been triggered by a creditor. Such circumstances are of course also included in the corresponding entry at Credit Bureau, which is why the rating of the potential borrower is significantly reduced. If there is already an active assignment of wages and salaries, at least without a guarantee, no further loan can be taken out without a salary assignment.
Potential lenders must then automatically assume that the prospective borrower will no longer have an overview of their financial position without the additional burden of installment payments. If you want a loan, you should also be aware that the installment payments must be paid in full and on time, otherwise the bank is at liberty to pledge the outstanding money. As a rule, however, the employer is not contacted directly and the income is seized, after all, missing payments can actually simply be a mistake – a prior warning before the seizure is mandatory.
The lender would also usually like to save the additional effort of a seizure, which is why the risks are minimized by evaluating the creditworthiness beforehand, in that only, at least from the bank’s point of view, trustworthy borrowers are only issued a loan.