Loans for employees

Hi,

Looking for suggestion on proposing employee loans. What are some of the common areas of loans provided(common ones are vehicle, personal, interest free loans etc)? What are the mandatory rules involved?

Those who have implemented please share your thoughts.

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HI Anisha,

We have implemented loan policy in our comapny. We have made it simple by bifurcating in 2 segment. 1) Critical Loan. This includes loan requirement for any medical emergency for the employee or employee’s blood relative. 2) Non-Critical Loan. This includes all the other financial assistance employee need. It can be to support the home loan, car loan, two wheeler loan or personal loan.
Then you need to define eligibility for these loan and what amount employee can request as loan along with repayment period.
You need to define then rate of interest, that you may bifurcate based on the designation or flat based on the work culture of your organization. Taking loan is a privilege provided by the organization, so if required, that can be provided after getting tenure commitment from the employee i.e: Employee Bond either of 1/2/3 years based on the process and policy
You need to define a proper process from loan application to approval and disbursement. Try to reduce the manual intervention as less as possible to provide a smooth and fast employee experience.
Please note, you need to calculate perquisite on the offered loan and add in the employee’s salary for TDS implication.
Hope this information would help you to create a loan process and policy.
Thanks,
Gulshan

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Hello @Gulshan_Nirmal-

That is good details. what is the process followed by you If the employee quits the organization during the loan payment period. How is the recovery done?

2 Likes

Hi Chitra,

During preparing his/her Full and Final settlement you need to recover the complete amount. If final settlement amount is less than loan outstanding than pending amount you need to recover via cheque issued by employee.

Regards
Arpana

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HI @Chitra

There are several ways. While drafting the loan agreement, you should request the advance cheque form the employee and mention in the agreement. The EMI should directly be deducted from the salary, but you can keep those advance cheque for future reference. While processing the FnF, the pending should be adjusted in the FnF and rest pending should be adjusted against those advance cheque.
After leaving the job, if in case employee is canceling the chqeue or denying the payment, you can take legal action against the employee.

Regards,
Gulshan

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