Employer credit – advantages & disadvantages

Loans with extremely high risk premiums.

In addition to banks, private lenders such as relatives, friends or employers are particularly suitable for financing larger purchases such as the purchase of a property. Many companies offer an employer loan to support their employees and retain them in the long term. But before the worker decides to take out such a loan, the pros and cons should be carefully considered.

An employer loan is particularly attractive in situations where other financing options have already been exhausted. This is the case with mortgage loans at the latest when the loan limit is reached. An employer can often do without providing real collateral: The monthly interest and principal payments are deducted from the salary. Due to personal financial problems, some proven employees have such a bad credit rating from a bank perspective that they are either not creditworthy at all or receive loans with extremely high risk premiums. For this group of people, an employer loan can often be the only way to get a loan at acceptable terms.

Take out an employer loan

But even if enough alternative loans are available, it can be worthwhile to take out an employer loan. As a rule, employer loans are offered at interest rates that are significantly below the market level. The employer wants to give his employees a lucrative advantage outside of the salary. Depending on the amount of the difference between the interest agreed with the employer and the market interest, interest of several hundred USD can be saved annually.

However, it should not be forgotten that the interest rate difference between the market interest rate and the interest rate on the employer loan must be taxed as a non-cash benefit. If the interest advantage is below the monthly allowance of 44 USD, it remains tax-free.

Many employers require their employees to repay the loan immediately when they leave the company – so taking out an employer loan is not an option if a change of employer is planned for the next few years.