What happens to a cash loan or mortgage and what does their repayment look like if the borrower is on L4 sick leave?
Certainly, credit installments must be regulated in accordance with the accepted repayment schedule, although in some banks you can use the so-called credit holidays citing the borrower’s illness.
Is it also possible to grant a loan on sick leave during pregnancy? Let’s see if you can take a cash loan or mortgage on L4.
Loan for sick leave L4
Sick leave, or a popular L4 dismissal, is a certificate issued to an employee by a doctor and constitutes the basis for recognizing such a person as temporarily unable to work due to illness or hospital stay or due to the need to take care of a sick family member.
All rules for issuing sick leaves are included in the provisions of the Act of 25 June 1999 on cash benefits in the event of sickness and maternity. Being on sick leave does not deprive the employee of his remuneration – he receives sickness benefit or sick pay, and in the long run, also care benefit.
However, banks treat such income differently and income obtained from professional work differently. As a result, very often the bank will refuse to grant a loan on L4. Therefore, when considering the relationship between a loan and sick leave, it should be noted that sick leave for more than 30 days affects the customer’s creditworthiness in a negative way.
Will the loan on L4 be granted? It all depends on the individual assessment of the customer’s creditworthiness, but it is unlikely to be without additional repayment security and the introduction of a co-borrower in the loan application.
Credit insurance and sick leave
During the loan repayment period, especially the long-term mortgage, the borrower is more than likely to become ill. Do banks take this into account and allow certain borrowers to take advantage of certain benefits?
Yes, this is the case, for example, when they are offered credit holidays, which is a temporary suspension of loan repayment. However, this may result in extending the loan period, and thus, increasing the total cost of the liability. Credit insurance in case of illness and incapacity for work is also available.
The relationship between credit insurance and sick leave is clear. This loan insurance is voluntary and one of the forms of collateral for the repayment of the liability.
If the borrower lost his ability to work, suffered permanent disability during the period of insurance coverage and the loan repayment or became ill and was on sick leave, the insurance company would take on the obligation to repay further loan installments. Most often, the period or number of installments repaid during the borrower’s illness is determined.
For example, life insurance can in some cases guarantee a chronically ill borrower to help repay a liability. It is worth reading carefully into the insurance offer, especially in the general insurance conditions. Situations for which the insurer will not take responsibility are indicated there.
In the GTC, the insurer also indicates the list of diseases and dysfunctions covered by insurance. Usually, these are:
- permanent disability,
- myocardial infarction,
Depending on the loan repayment insurance chosen, the borrower may guarantee partial or total repayment of the remaining liability in the event of the borrower’s illness.
To safeguard their interests, insurance companies review the client’s medical records. They also use insurance grace period insurance, so if a client falls ill 30-60 days after taking a loan with insurance, they may be excluded from insurance protection.
Will I easily take out a cash loan from L4?
Is there a link between a cash loan and sick leave? Unfortunately, yes, and people who would like to apply for a cash loan during the release of L4 may receive a negative response from the bank to their request.
When such an application is submitted, the bank verifies the customer’s creditworthiness and credibility. Usually, he also requires him to submit a certificate on the amount of income received, e.g. a certificate on remuneration from the workplace, where the employee is on sick leave.
It happens, however, that the loan procedure for cash loans is simplified, as a result of which you can take a loan for a statement on the amount of income, and the lender does not need to know that the customer is on L4.
In the case of loans granted at banks for regular customers who have a good cooperation history, sick leave is usually not an obstacle to making a financial commitment.
Sick leave and ability to pay a cash loan
With prolonged sick leave, lasting longer than 30 days, ZUS takes over from the employer the obligation to pay sickness benefits to the employee.
In some banks, it will not be included in the customer’s creditworthiness at all, so if he has no other sources of income, he will not receive a cash loan due to insufficient creditworthiness.
What documents will I need to get a loan during a prolonged L4 release?
Actually, to take a loan from a bank during a longer L4 exemption, the customer will need the same documents as when applying for a loan outside the L4 exemption.
Sometimes, if the loan is taken, for example, by a pregnant woman who is on sick leave due to her condition, it is required to submit with the loan application that she will return to work after maternity leave.
Such a document must clearly indicate when a woman will be able to return to gainful employment and that she does not intend to take parental leave. These issues will be verified by the bank, so the borrower should be aware that making false statements may have legal consequences.
Do I have a chance for a mortgage while on sick leave?
When applying for a mortgage at the bank, it is obligatory to verify the financial standing of the customer who is applying for a loan. It is verified at the Good Finance Information, where its credit history is checked.
In addition, based on the submitted income documents, the bank calculates the current creditworthiness of the potential borrower, i.e. his potential ability to repay the loan together with accrued interest, if it is granted.
As a result, together with the loan application, you must submit, among other income statements. For this purpose, bank prints are used, which often have the field to indicate “an employee is on sick leave – YES or NO”. When the employer issuing the certificate, the “YES” checkbox informs the bank that the customer is on L4 dismissal.
Some banks will actually reject such an application right away when applying for a mortgage. And L4 does not deprive an employee of his livelihood because he receives remuneration from the employer for the first 30 days of dismissal and later sickness benefit from the Social Insurance Institution.
It cannot be unequivocally said that a mortgage on sick leave cannot be taken, but it will no doubt be more difficult for a potential borrower to do so. Some banks reject the loan applications of people on sick leave and long-term sick leave because such a client may become unable to work and have no money to pay off their loan obligations.
How is the ability on the L4 exemption for a mortgage assessed?
With sick leave, banks are cautious about calculating the borrower’s creditworthiness. As a rule, when L4 lasts less than 30 days, banks will accept such income when calculating the loan repayment capacity.
However, with a sick leave period of more than 30 days, many banks will not count salary or sickness benefits at all when calculating their creditworthiness, or will only include part of that income.
What documents will I need to get a loan during a prolonged L4 release?
With a longer dismissal of an L4 employee who is applying for a mortgage, it may be necessary to submit additional documents in addition to the certificate of income amount.
Among them will be documented from the Social Insurance Institution (ZUS) informing about how long a person is ill and how much sickness he receives.