Understanding Employee Loans: How Are Interest and Deductions Managed?

Dear All,

Can you help me understand the loans that can be availed by employees? What about the interest and deductions, and how should they be handled? Is there a minimum wage limit that needs to be enforced during the deduction of loan principal and interest?

Kindly clarify.

Regards,
SK.

Hello SK,

You can note down the following:

1. House Building
2. Two-wheeler
3. Four-Wheeler
4. Computer
5. Festival
6. Children's Education
7. Self-Education
8. Medical for major diseases
9. Natural Calamity
10. Attending conference/seminar in India/abroad
11. More heads can be thought of depending upon the local needs.

Yes, the loan can be disbursed based on the salary and repayment capacity. More than that, every year budget allocation is very important.

Wishes,
Senthil Raj
Email: karpavi_raj@yahoo.com

Dear Senthil,

What is the eligibility to avail a loan with reference to the number of years working with the company? I mean, how long an association is required to avail the benefit of a loan? Please help me to get clear on this matter.

With thanks,
Mahadev

Dear Maha,

In the government and top corporations, clear-cut policies are framed regarding eligibility based on the cadre, number of years, salary, repaying capacity, etc. However, in small organizations, this is not always clear.

Some very important points to note include the real need for the loan, number of years worked, salary, and repaying capacity. For instance, house building loans for large amounts can be granted to higher officials.

Best wishes,
Senthil Raj

Hi,

I think when the matter of years comes, it varies from company to company. Our company provides small loans up to Rs 5000/- to trainees as well. But in my opinion, it should be limited to those employees who are permanent and have completed one year. Am I right, seniors? Comments required.

Ali

Dear Ali,

You are right. The company and the employees will be safe if it is limited to permanent employees.

Wishes,
Senthil Raj

Hi,

It depends on the company policy. Preferably, we need to know the importance of each request. Cases like natural calamity, salary advance for medical treatment, etc., can be given to any employee. For other loans such as asset loans, house loans, etc., we can set eligibility criteria like above 2 years or more (this needs to be decided by the company). This is also a means to retain an employee.

Regards, Chakradhar.

We have only 2 categories for loan disbursement:

1. Personal loan
2. Education loan

The eligibility for an individual to apply is:
- Personal loan: 6 months of tenure in the organization. The loan provided is 2 times the monthly salary payable in 10 months.
- Education loan: 1-year tenure. The course/training taken up should ideally be related to the employee's work. The disbursement is based on the employee's level in the organization and varies from 25K to 1 lac.

There is a notional interest payable for any loans. Please check with the finance.

Regards,
AS

Hi,

Is there any law enforcement on the loans given to employees? What about the liability if the employee left the company or if he is being terminated? How do we recover the loan?

Regards,
SK

The loan disbursement should be by way of an agreement where the agreement clearly stipulates the terms of repayment of the loan, the tenure, and the procedure in the eventuality that the employee resigns.

AS