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Got debts? You may be able to get a loan through your employer

Written By:
Guest Author
Posted:
16/02/2016
Updated:
17/02/2016

Guest Author:
Paloma Kubiak

Employees with debts may be able to get a low interest, fixed rate loan from their employer as companies seek to improve their worker’s productivity.

With one in three employees saying money worries impact their productivity at work, companies are looking for ways to tackle the problem.

The SalaryFinance scheme – the first of its kind in the UK – is free for companies to sign-up to and allows employers to give low interest, fixed rate loans of 7.9% APR on borrowing between £1,000 and £25,000.

Repayments can be made over a 12 or 24-month period and the biggest benefits to workers is the repayments are deducted from payroll rather than direct debit, and the eligibility of the loan or the 7.9% APR doesn’t change based on a person’s credit history or income amount.

The scheme was successfully trialled last year and SalaryFinance has now partnered up with Benefex to offer the scheme to the employees of a high street retailer, big six energy provider and a large insurance company.

In order to be eligible, employees must have worked at the company for a minimum of a year.

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Asesh Sarkar, one of the co-founders of SalaryFinance, said: “One in three employees say that money worries impact their productivity at work. SalaryFinance provides a cost-free way for employers to help their staff, particularly those on middle to low incomes, payoff their debt quicker and improve their financial health.

“We deliver the equivalent of a 3% pay-rise to staff, for free. Our pilots have been a huge success and we are excited about rolling out to the employers across the county.”

How good is the 7.9% rate?

SalaryFinance says the 7.9% APR rate is consistent, no matter what amount you borrow and a worker’s credit score won’t impact it either.

Sainsbury’s Bank offers loans of £15,000-£25,000 at 3.4% rep APR while Tesco lends at 3.6% rep APR on these amounts, cheaper than the SalaryFinance rate.

However, it said that with the average personal debt in the UK at £4,000, the representative rates would actually be 7.5% APR and 12.3% APR respectively. However, it adds that this is advertised for higher value loans, not accessible to middle or low income earners, as it’s beyond what they can reasonably borrow.

Further, while the rates look cheaper, they’re dependent on credit score, so many will get rates above those advertised.