Practically, every third Polish family, the payment of the “Family 500 plus” benefit helped to get out of the debt spiral or significantly reduced it. A similar group of people – governmental funds allowed to avoid borrowing money. At least this results from the study of the Credit Information Bureau and BIG “Infomonitor” developed on the subject of the “5 00+” program in 2017 1 . How does this one of the loudest and evoking emotions of such projects affect creditworthiness? Let us lean over this important issue and the consequences that await us in the near future.
“500 plus program” under the microscope …
Government support for the “Family 500+” program has been in operation since April 2016 and is granted in principle for the second and subsequent child of a given couple. In some cases, you can also count on an only child or an only child for monthly funding. So far, to receive payment of benefits – the monthly income of the family could not exceed PLN 800 in the case of a healthy child and PLN 1200 – for a minor with a certified disability. However, as announced by the Ministry of Family, Labor and Social Policy 2 in 2019, the income criterion will be adjusted. It is enforced by raising the minimum wage, which currently amounts to PLN 2250 gross – that is PLN 1633 per hand. This means that many families who currently receive benefits may lose their right to it.
A survey conducted by the BIK and BIG “InfoMonitor” It is also clear that the government program zasilił wallets more than 2.6 million families. For 17 percent. respondents have become a solution to reduce overdue and unregulated debts, and for 12 percent to completely get rid of them. This is not the only impact of the “500+” program on the situation of Polish families. According to 29 percent. of surveyed people – child benefit allowed them to avoid borrowing from banks, and 27 percent. it did not have to incur new liabilities in loan companies 3 . Very important in the context of government support, which is often mentioned and written is its significance for the assessment of creditworthiness. Is the “500+” really decisive for a higher creditworthiness?
Creditworthiness and “500+ Family”
Simply put – the creditworthiness is to give the bank the answer as to whether the customer will manage to repay the liabilities within the set timeframe with contractual interest. Financial institutions often make such an assessment according to their own standards – without revealing their exact method of calculation. The exact definition of creditworthiness is illustrated in art. 70 of the Banking Law of August 29, 1997.
- By creditworthiness is meant the ability to repay the loan taken together with interest on dates specified in the contract. The borrower is obliged to submit at the bank’s request documents and information necessary to assess this capacity.
- A natural person, a legal person or an organizational unit without legal personality, if it has legal capacity that does not have creditworthiness, the bank may grant a loan provided that:
1) establishing a special way of securing loan repayment;
2) presenting, irrespective of securing loan repayment, the entity’s recovery program, the implementation of which will ensure – according to the bank’s assessment – creditworthiness at a given time, while the recovery program of the entity referred to above may be, in particular, the arrangement adopted as part of restructuring proceedings carried out in accordance with the Act of 15 May 2015. – right restructuring turyzacyjne 4 .
After all – there are parameters that all banks “as one husband” take into account. Is there an “500+” supplement among them? Although initially voices appeared that the funds from the “Family 500+” benefit are a chance for a large part of Poles for better creditworthiness. So now – it can be clearly stated that this does not apply when applying for a housing loan. The analysis of the “Bankier.pl” portal clearly shows that Polish banks almost do not take into account the benefits of beneficiaries from the “500+” program. An example of an institution that at the beginning was an exception to this rule was Alior Bank and the BPS cooperative bank . The latter required the customer only to submit the decision with a relevant certificate.
Why are banks reluctant to use “500+” as proof of better creditworthiness? Most of the respondents argue that each of the needy families receives “500+” benefits – temporarily, not lifetime. Thus, the money is only payable until the child reaches the age of majority. And sometimes they may lose their right to them much faster, for example when their wages go up. Meanwhile – mortgage loans are financial products that are drawn for at least 20-30 years. The fact is that banks are not guided by granting benefits and social benefits when calculating their creditworthiness. Especially when it comes to long-term commitments!
Exceptions to the rule!
Therefore, the “Rodzina 500+” support program does not work as a tool to improve mortgage creditworthiness. However, it is not excluded when applying for cash loans or loans-payday loans drawn for definitely shorter deadlines. In these cases – any benefit paid from public funds can be treated as a systematic and additional cash inflow, which the bank will treat as “extra” finances for the maintenance of the family, but also an auxiliary pocket to pay fixed loan installments.
Therefore, the majority of banking institutions, when calculating creditworthiness – from the monthly income of the family, subtracts the costs of its maintenance. In this way, the sum that the borrower may spend on regulating the debt incurred is estimated. The bank assumes that the client who receives social benefits without any downtime also has the right to repay his short-term commitment. Yes, there are cases in which the benefit is taken away from the family – due to the improvement of the financial situation or other circumstances. Therefore, before trying on a loan with the support of “500+”, it is worth using the credit analyst’s advice. He will make a real assessment for the chance of getting a loan or a loan with the help of a social allowance.
” 500+ Family” is risky for most banks!
In conclusion – several important reasons must be raised. First of all – funds received from the “500+” program can actually be taken into account by a large part of banks when calculating the amount of the household budget. And secondly – this kind of benefit has an impact on increasing creditworthiness, but only in the group of cash loans and loans taken up to a certain amount and for a short time. In this case, financial institutions check definitely less parameters than when we plan to take a mortgage for 30 years. Here we have to take into account that we will be verified not only in terms of the amount of income, source of income or expenses. The bank will also track the entire credit history, age and savings, which will be counted towards your own contribution.
This information is not very optimistic – especially for families who dream of enlarging their home sockets. Nevertheless, we must be aware that we live in a time of high economic and economic prosperity. The unemployment rate is relatively low, as is inflation, and wages per year climb upwards. We are better off as a country – also in matters of meeting the high needs of the “500+” program. And this – reasonably used by parents becomes a financial support for repayment of current liabilities and prevents the emergence of new payment congestion.
Creditworthiness – how to raise it?
The ideal solution seems to be – postpone the monthly amount received under 500+. ” Unfortunately, the necessity and the temptation to spend money on much needed – but not unnecessary things each day is almost essential. That is why regularly depositing funds from the state is a recipe for raising funds that will increase your creditworthiness … And, by the way, they will help to secure the future of your relatives. They will also help to reduce the negative effects of possible closure of government assistance in the future. Because the project will not last forever, and its payouts sooner or later will end – is not subject to the slightest discussion.