How Employee Loans Can Help You Manage Unexpected Expenses or Financial Emergencies

How Employee Loans Can Help You Manage Unexpected Expenses or Financial Emergencies

Many people create sound financial plans. They know exactly how to plan their salaries to sustain them for the period before their next payday without the need to seek employee loans. Immediately after they receive their salaries, they go to the market and stock up their homes with household materials needed for a month, especially food items. They set aside a budget for transport, bills payment, children’s school fees, etc. They think they have it all planned out, but sometimes, the unexpected comes up.

Emergency needs are mostly inevitable in the lives of humans. Sometimes you fall sick, and the best way to treat yourself is to seek medical attention from experts in the field, which will cost you money. No one plans to get sick; therefore, it is almost impossible for anyone to have hospital bills planned in their monthly financial budget, not if they don’t have an underlying illness before. Hospital bills are just one of the numerous unexpected bills a person might face in their monthly budget. Another example is auto repair; no one plans for their vehicles to break down, and it is important to make repairs so you can continue to transport yourself to your workplace.

As you would agree, emergency expenses are inevitable; therefore, one must know how to manage the situation. This article will explain how you can take employee loans when faced with unexpected expenses that must be sorted out ASAP.

What are Employee Loans?

Employee loans are loans offered to employees by their employers. These loans are provided to employees who have emergency needs to solve. Many employers might not have the financial buoyancy to give out these loans on their own, so they seek the service of a loan provider to help them provide loans to their employees in need.

Employee loans are usually low-interest loans granted to employees to meet their financial needs. This type of loan is usually deducted from the next salary of an employee.

Types of Employee Loans

Depending on the method through which your employer offers the loan, there are two types of employee loans.

  1. Employee loans direct from the employer: This is the type of loan you get directly from your employer. Your employer sets the conditions for receiving the loan, and if you can meet them, you will be offered the loan. Your employer decides the interest rate and the method through which you will pay the loan and the interest. 
  2. Employee loans from a third-party service provider: This is where your employer seeks a third-party loan service provider like Earnipay to provide you with the required loan. All your employer needs to do is supply every necessary information to allow the service provider to grant you the loan you require.

Benefits of Employee Loans

Apart from the fact that employee loans help employees solve their unplanned needs, there are some other benefits you can enjoy by taking employee loans, some of which are listed below.

  1. You can borrow enough money to tend to your immediate needs

Most employees seek loans to tend to their immediate, unexpected needs. Employees can easily get the funds required to sort those needs with employee loans. 

  1. Low-interest rates

Employee loans usually come with low-interests. With about 3% of the loaned funds to be paid as interest monthly, an employee should be able to easily repay the loan.

  1. Easy repayment options

With an employee loan, you do not need to look for where to get money to repay your loan. The funds will be deducted from your salaries during the next pay period. This way, you can prevent the interest from accruing since you do not have to start looking for funds to pay back your loan collected.

Demerits of Employee Loans

As we have some advantages connected to employee loans, we also have some disadvantages, some highlighted below.

  1. The amount you can borrow can be limited

The amount you can borrow is usually limited to your annual net salary. In most cases, you can only borrow up to 50% of your annual salary. For this reason, you might not be able to get enough funds if the amount you need at that moment surpasses half your annual net pay.

  1. Risk of getting stuck in a borrowing cycle

Loans, when not properly managed, can put the borrower into a borrowing cycle. They might need another loan to sustain themselves after paying the previous loan collected. You should draft an excellent financial plan to help you manage finances to prevent you from getting stuck in the borrowing cycle.


Financial hardship is something humans face at one point in time of their lives. Many employees go through this phase, especially when they have unplanned expenses. Most employees seek traditional high-interest loans to meet their needs, but you can get loans with low interest and good repayment options with employee loans.

To get started, you can introduce your employer to and ask them to register with the service. You can request loans with your employer’s approval when they supply all the required information. This way, you can meet your emergency needs with no stress.

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