Creating an Employee Loan Policy: How to Start with Interest-Free Options?

Dear Sir/Madam,

We want to create a loan policy for our employees with an interest-free/minimum interest rate. Could someone assist us with how we can proceed with this? We are looking for a loan agreement that emphasizes on repayment.

Thank you in advance for your help.

Regards,
Naresh

Dear Naresh,

Ensure the following while framing the loan policy -

1. Employees should be confirmed.
2. Should have genuine and verifiable reasons (option).
3. Eligibility and amount to be determined on the basis of tenure.
4. It's repayable in an installment of 24 - 36 months.
5. Would be directly deducted from salary.

While framing, ensure that the approval of the Department and Finance head is taken.

A loan issued by an insurance company that uses the cash value of a person's life insurance policy as collateral. Sometimes referred to as a "life insurance loan." Traditionally, these were loans issued at a very low interest rate, but that is no longer universally true. If the borrower fails to repay the loan, the money is withdrawn from the insurance death benefit.

Amount that the owner of a life insurance policy can borrow at interest from the insurer, up to the cash surrender value. If interest is not paid when due, it is deducted from any remaining cash value. When the cash value is exhausted, the insurance ceases. If the insured dies, any outstanding policy loan and interest due are subtracted from the death benefit.