Special loans for employees

I remember when I was in the first bank that I worked for, they have a salary loan that charged 1% interest per annum. Take note, that's for one year interest which is very low that's why almost all of my office mates have been availing that loan which has a limit equivalent to 3 months salary. I miss those days when the company gives special attention to the needs of the employees. This reminds me of our social security system which gives our salary loans at 6% per annum. Still quite low compared to the bank loans.

 

Salary loans and 401k loans can be really great, especially when the interest in paid back to the employee, not the employer or bank. But the down side is that if you get fired for any reason the loan is due back within a short period (like 60 days) so you can end up defaulting and ruining your credit, or being charged the tax (about 10%) on the 401k withdrawal.

 

Yeah it's nice that companies do this for their employees. They know they will get the money back since usually the amount due is not much more than the employers monthly salary. A friend of mine used it constantly but it became a bit of an issue when she was overusing it... they had it so that you could get paid 500e extra and it would be deducted from your next pay check. But she was using it each month so she pretty much always owed her employer 500e.

It's great for those who need a bit of help once in a while... kinda acts like a small backup fund.

 

I know of a company that grants employees with a multi-purpose loan with a very low interest. It is good at the outset for the benefit of the employees. However, some employees are abusing that privilege. They would take out a loan and lend it to other people at a higher interest rate. In short, they are making a business out of that multi-purpose loan privilege. The company does not suspect that the loan is being exploited by some business-minded employees.

 

I've never worked in a company that would arrange this kind of deal but I can see the benefits it brings. Employees who do take up an offer of that sort will know they won't get into financial difficulties by taking out a 3rd party loan but at the same time, I have to ask what happens if your employment with that company ends?

 

Yeah but I really can't blame them... that seems like a good deal to me. I don't mind doing the same, I get money from my stock broker for a good interest rate and then I can invest that into stocks or bonds which provide me with more income than the interest on the loan. Of course this always carries it's own risk.

 

Fortunately, the company is still alive and doing well. Maybe it's because of good karma that the owners are having. They are so generous with their employees and always have their welfare in the employer's mind. The multi-purpose loan is intended for housing, home improvement like new furnitures and appliance, education of the employee or the children, health like checkups and any other needs. It would be great if all big companies would have that kind of loan to their employees.

 

I don't think it's really up to the company to fund the financial needs of their employees. It's not their job and with large loans it can become a problem if the company needs to reduce it's workforce. Small loans, like up to 1 month of salary, is a nice gesture but I don't think even that is necessary. Employer is for giving you work, banks are for giving you loans.

 

Normally, the big companies who grants special loans to their employees are owned by generous people and that their company is earning good. I agree that it is not necessary but some employers have their minds on the welfare of their employees particularly those businessmen who started from scratch. The owner of our company is the richest man in the Philippines who started as a shoe salesman and now owns the largest chain of malls and supermarkets and the biggest bank. He is generous with his employees.

 

I also think it's not such a bad idea to do this. As long as the loan is paid in full at the end of its term then I suppose they don't have anything to worry about. Anyway,this can be considered as an income on the side besides one's regular day job. I'm also more of a business minded person so if ever I would be given the chance to benefit in this kind of deal, I would take the opportunity. For me, it's the just the same as borrowing money to start a business. Besides, lending businesses seem to be working out well where I live.