A major consideration for an experienced job-seeker is the company policy on salary loans for employees. A lot of members of the working class take advantage of this particular kind of loan for several purposes: medical emergencies, calamity assistance, house renovation, an investment purchase, educational assistance, and many more. While other means can be executed to be able to borrow money, this is one of the safest and easiest ways to do so. The payment terms are usually flexible and easier than those of other bank or government loans. Of course, like most other things, there are both advantages and disadvantages to taking out this particular kind of loan.
One of the conditions of taking out a salary loan is that it is completely or partially paid off by the time the employee receives his next paycheck. On one hand, that is an advantage because the employee is assured that there is money on-hand once the need to pay for the loan comes. It can also be set so that the amount for the loan is automatically debited from one’s paycheck and there is no need for the employee to personally take out the money to pay off the loan. That takes considerably less effort all around compared to asking the employee to pay off the debt. The employee will then be required to withdraw cash, and pay it back to the company. This particular aspect of the salary loan is, however, double-edged. If one lives from one paycheck to another, then it might not be a good idea to have a considerable amount of money taken out of a couple of paychecks for a period of time (until the debt is paid off). It may hurt the budget, especially if one’s salary has already been pre-allocated for expenses and utilities. A considerable chunk taken out of one’s paycheck may cause problems in paying off other bills, or may shave off necessities from the grocery list. Of course, it would not be wise to use debt to make up for the loss caused by another debt, and you may dig a deeper hole for yourself if you plan to do so.
Salary loans are short-term loans; it isn’t as difficult to take one out as compared to other kinds of loans. However, it is a general rule that the easier it is to get a loan approved, the higher the interest rate usually is. All loans have interest; you may think of it as compensation for allowing you to borrow money. The salary loan’s high interest rate should be carefully considered if you plan on taking it. One needs to be responsible in paying off this particular debt because it can balloon out of proportion and has the tendency to become very difficult to pay if one is not as mindful as need be. As is the case with loans in general, one must ensure that it will be feasible to pay off not just the original loaned amount, but the interest incurred as well. Should the temptation to skip on one payment arise, the interest can, and likely will, balloon. Utmost consideration should be dedicated to computing whether the increase in payment is worth it.
In a nutshell, salary loans for employees may be utilized quickly to be used in emergencies and sudden needs, but the ease in borrowing money does come at a price. One must be careful and mindful of the reasons he has for borrowing money; carefully separating needs and wants, and contemplating on utilities and other necessities. As loan payments on salary loans may bite off a sizeable chunk from a couple of months’ paychecks, can your budget allow such? Before taking out a salary loan, or any loan for that matter, please research on the loan terms and consider your intentions before getting it.
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