Borrowing money is one of the most common activities that are present in society.
If you need an injection of cash, you don’t necessarily have to go to a bank or loan company. Many prefer to borrow money privately, e.g. with a friend or family. You can also raise funds at work. What is a loan from an employer and how to write an appropriate application?
Although many consumers like it when their budget is in relative and regular order, some expenses can sometimes surprise. What is worse, their cost is difficult to bear from current expenses, which may prove to be insufficient. Failure of home appliances (washing machine, TV, dishwasher, fridge), the need for a sudden renovation of the apartment (flooding, fire), car breakdown, the need to buy additional treatment.. How many people, so many examples.
In the face of this kind of unexpected situation, which costs have to be faced, many of us are trying to look for the best way out of this situation, taking into account the various options available. Some, in the face of such events, look into their savings account, for example. Many accumulate funds in this type of deposits just in case of emergency expenses, for so-called a rainy day, leaving them intact every day.
Unfortunately, not everyone has such opportunities. If own resources are not sufficient to cover the urgent expenditure, then the consumer will be forced to look for a loan. There are many ways to raise funds as part of such a transaction. The practice of borrowing money has finally been going well for today, and in the age of internet and universal access to information – you don’t have to be afraid of that.
Who can I apply for a loan from?
A loan can be obtained in many different ways. Of course, the first thing that comes to mind is borrowing funds in a private group. Many of us gladly seek such help from friends, relatives or family members. People who unite and trust each other can borrow money freely. A private loan can, however, also be granted on fully formal terms, for example with a private person unknown to us. In this case, however, it is recommended to draw up a classic private loan agreement.
Where else can consumers in need of cash apply for a loan? It is impossible not to mention the financial sector, which in the end treats money lending service as the main pillar of its activity. Persons who, for various reasons, do not want to borrow funds privately, can apply for a commitment in the form of a bank loan. The offer of non-bank companies that specialize in short-term loans (payday loans) or long-term loans (installments) is also extremely rich.
However, the issue does not end with loans and private or non-bank loans. Although many people do not take this scenario into account, you can also apply for a loan from your employer. We encourage you to take a closer look at such a solution, because in some cases it may be a more interesting and less expensive solution than a loan or even a private loan.
A loan from an employer – what is it and what does it consist of?
As the name suggests, a loan from an employer consists of borrowing a fixed sum of money directly from the person who employs us or from an enterprise that performs this function. Borrowing money in this mode is based on the conclusion of a free agreement between the borrower and the borrower. The provision of loans by the employer is not in conflict with the law. Not only that, this kind of financial obligations fits within the framework of the Civil Code, and more specifically – Article 720 1.
The circumstances of borrowing money under a loan from your employer vary widely. Loan amounts may vary (from several thousand to even several dozen thousand zlotys). In addition, also sources from which the employer can obtain funds for the loan. Depending on the specifics of the workplace, the funds can be paid from the so-called company social fund, current assets of the company or other funds included in its budget. Funds can also be paid out by Employee Loans and Offices, which we will write about in more detail at the end of today’s text.
What does the process of applying for a loan from an employer look like?
The whole process accompanying applying for a loan from an employer is hard to consider as complicated. It shouldn’t cause much trouble. First of all, to initiate it, you will need to ask the employer to borrow money. You should present your financial expectations as well as the time when we will be ready to return the borrowed funds. Applying for a loan from your employer does not mean that a commitment will be granted to us.
The first factor the employer will have to check is seniority. The person who has worked in a given workplace, of course, will have a better chance of obtaining funds. The employer alone determines the minimum length of service that authorizes the employee to apply for a financial liability. For example – it can be 6 months.
If the employer considers that the employee’s working time is sufficient, then they can already proceed to determine the parameters of the loan. The payer may accept the employee’s suggestions or negotiate, e.g., a different amount and repayment date. These factors may not only depend on the financial condition of the company and the size of its budget. It can also be affected if the employer is already burdened with claims that other employees have with him.
The issue of additional costs of the loan remains to be determined. It may be interest-bearing or charged with interest, or completely free of interest. It will therefore depend on whether the consumer will only repay the amount borrowed or the profit the employer will want to make on the commitment given. What will the repayment of this type of liability look like? Most often, the employer deducts the installment of the loan from the monthly salary.
After determining the terms of the loan and related parameters, the employee will have to draw up an appropriate document, i.e. an application. However, before we discuss what should be included in the content of the application, let us pay attention to the issue of the aforementioned source from which cash can be paid from the employer.
Employee Loans and Social Benefits Fund
As mentioned earlier, a loan from your employer can be granted from a variety of financial sources. Funds can be paid out of the company’s funds or part of its broadly understood budget. However, this is not all. It is also possible to grant loans under dedicated and established employee loans funds. Of course, they are available only in selected workplaces.
- The first of these are the so-called Employee Loans 2, operating e.g. in factories and larger companies. They function to provide broadly understood material assistance to people employed in workplaces in Poland. This assistance usually takes the financial form. It can be granted in the form of both a short-term loan and a long-term commitment or financial assistance (in the event of an employee’s difficult life situation). Liabilities at these ticket offices have no interest, which means that they are granted free of charge. To establish a cash register, an initiative of at least 10 employees is required in any workplace. The control over PKZP is exercised by the company trade union, but those operating at the ticket office need not belong to it. Funds in this fund create regularly deducted contributions.
- The second solution, which is available in some workplaces as an alternative to the aforementioned types of loan, is the Social Benefits Fund 3. This is a special, dedicated bank account that is created by the employer and fed by a certain amount of funds. The Social Benefits Fund can be used not only for financial assistance for an employee in the event of a stagnant need related solely to the apartment (e.g. renovation). The funds accumulated on it can also be used by the employer for other purposes. For example, the provision of non-returnable assistance to people in difficulty and social support. In addition, allowances and sports activities. We write “people” on purpose, because in certain cases not only employees can benefit from the Fund. Their families and retired, former employees may also be entitled to the funds.
A loan from an employer – how to write an application?
Verbal arrangements for an employer loan are not enough. We also recommend that you prepare a written loan application. We recommend, in particular, to pay attention to this issue if you wish to take a loan from the above-mentioned special funds. They operate on the basis of regulations. One of the points of such arrangements concluded between the trade union organization and the employer is the preparation of an appropriate loan application, which should contain the following information.
- Place and date of the application.
- Indicate what type of loan the employee is interested in (short-term or long-term).
- Enter the loan amount and the amount and amount of installments, if any, in which it will be repaid.
- Then enter the month and year from which the loan repayment begins.
- One should also remember about the provisions regarding further repayment of the loan in the event of termination of the contract regulating the employment relationship.
- You should not forget about the employee’s legible signature.
- Some establishments may also require a surety from other employees (employees only).
Can the abovementioned provisions also be used in the case of a “classic” loan from an employer, granted without the intermediation of any funds? Absolutely, because the above-mentioned information is comprehensive and reliable also in the matter of this type of obligations. Please do not forget only about two reservations.
- In the case of a loan granted, e.g. from the company’s current assets, the employer has the right to impose additional costs on the loan (e.g. interest). Their dimension and calculation method should be specified in the document.
- It is worth agreeing with the employer on the issue of documenting the loan application itself. You may not need to make an application in itself. Why? Because all necessary information about the loan can be included in the loan agreement.
Should I pay tax on a loan from my employer?
The issue of payment of tax on a loan granted in the workplace appears in the event of cancellation and applies to loans granted from the Social Benefits Fund. Then, the employee will have to pay the appropriate tax for the canceled funds that originally had to be repaid. The workplace does not collect any advance payment – it is the employee whose loan was canceled that only needs to include such information in the next tax return.
Paying off the loan with the employer, and terminating the contract
What if during the loan period the employer terminates the employment relationship agreement, i.e. he stops working in the given workplace? It usually depends on whose initiative the cooperation ends.
- If this occurred on the part of the employer, the loan should be continued to be repaid on the terms originally agreed between the parties until the sum borrowed is fully refunded.
- However, if the contract was terminated due to the fault of the employee, the employer may request immediate repayment of all remaining debt under the loan.
In the event of problems with recovering the remaining sum of money, the employer has the right to take standard steps in this direction. Like loan companies or private lenders, debt recovery can be done through the services of debt collection companies. In special cases, the case may even go to court or be handed over to a bailiff who will enforce the debtor’s assets.
A loan from an employer – advantages and disadvantages
Considering the above information, there is no doubt that a loan from an employer is a solution worth considering. This type of loan should be particularly looked at by those who, for various reasons, are not interested in classic private loans as well as bank loans and loans in parabanks. For an honest picture of the type of commitment described, we will now present the biggest advantages and disadvantages associated with a loan from an employer.
- Many loans remain interest-free. This means that the borrower does not incur additional costs related to the repayment of the liability. At the end of the loan period, only the amount of money borrowed should be returned.
- The employer does not have to check creditworthiness. An employee can get a loan even if he has had unpaid debts in the past or has been in default.
- The issue of verification of employment status is also connected with the above point. The loan is granted by the employer and the repayment guarantee is the salary from which the installment of the loan is deducted from monthly.
- Depending on the arrangements, the employer and the employee may arrange a convenient time for the repayer. Therefore, repayment of the loan does not have to be a heavy burden for your daily budget.
- An employer may refuse to grant a loan if the employee has, for example, too short work experience or if the company budget cannot afford more such obligations.
- Granting a loan obligation by the employer strongly binds him with the employee, which restrains him if he wants to change his job.
- Another employee of the company may be the guarantor for the loan.
- The installment of the loan is deducted directly from the monthly salary, which depending on the amount of the loan can significantly reduce it.