Banks when assessing loan applications of clients applying for various loans take into account the amount and source of income. What chances of getting a loan will have those clients for whom the main source of earning is a replacement contract, and the loan can be taken only on the basis of such income?

Replacement agreement and credit opportunities

Many bank customers are wondering whether they will get a loan when working on a replacement contract. How do banks treat such an agreement and what exactly is it?

A replacement contract in accordance with the regulations may be concluded by employers in the event of illness, vacation or other justified absence of the employee at work. For the employer, such a contract is very advantageous because he employs the employee to substitute in his company and can ensure continuity of work.

A “replacement employee” should be employed in the same position as the replaced employee and perform the same type of work. The contract shall specify:

• type of employment – replacement employment contract;
• designation of parties to the contract;
• date of conclusion of the contract;
• type of work;
• place of work;
• remuneration for work corresponding to its type, together with an indication of the components of remuneration;
• working hours;
• date of commencement of work.

The employer may specify how long the contract will last, but it may not be shorter than the expected absence of the employee. An unlimited number of replacement contracts can be concluded, in accordance with the Labor Code amended in 2016.

Banks properly treat a replacement employment contract in the same way as a fixed-term employment contract. What conditions must be met to get a loan in this case? If the basis for obtaining income is a substitution contract and the creditworthiness is high enough, a cash loan is available at Polish banks.

However, in the case of mortgage housing loans, the matter will be much more difficult.

Replacement agreement and cash loan

Banks take into account the amount of clients’ income when considering an application for a cash loan. They have smaller requirements than in the case of borrowers applying for high-value mortgage loans with mortgage collateral.

Does the bank agree to the client’s request in the event of obtaining income from the replacement contract and grant a cash loan? A replacement contract does not necessarily exclude this.

It must meet certain assumptions:

• must last at least 3 months,
• must be concluded for a minimum of 12 months in advance,
• income derived from it must be sufficiently high.

If a 12-month replacement contract is concluded and the cash loan is to be taken after 3 months of its duration, most often banks will decide to grant it only for a maximum of 9 months, which is the duration of the replacement contract.

In addition, only some banks will accept this agreement. You also need to know what are the documents required when applying for a loan. The client may be asked for PIT from the previous year in order to additionally verify his income.

Replacement agreement and mortgage

While a cash loan will be granted even with a replacement contract, it may be difficult to get a mortgage in this case. Then a replacement contract for the lending bank may not be sufficient. Same as the trial contract.

Do you know that…?

In most banks, where clients apply for a mortgage with a replacement contract, it will not be granted. However, when changing the existing contract to a contract for an indefinite period, the time worked by the client under the replacement contract will be included in the minimum time required by the bank for obtaining income, which facilitates obtaining a positive response to the mortgage application. And the replacement contract is just as important as other employment relationships.

A replacement contract gives you a chance for a loan

Temporary contracts, which include a replacement contract, are not the ideal source of income for banks for clients applying for different types of loans. However, they do not exclude the possibility of obtaining a cash loan.

With a mortgage it will be more troublesome and it cannot be ruled out that a customer employed solely on the basis of such a contract will not have a chance to get a mortgage himself. Where is the easiest way to get a loan? Where is the replacement contract accepted? It is worth checking in the loan regulations of individual banks.