Basically, a Salary loan or Payday loan is a monetary loan provided to borrowers that must be paid in full or on installments when the borrowers receive their next pay check. The loan amounts granted are typically fairly small and are based on the gross amount of money the borrower earns for each pay period.  These loans are also called cash advance loans or check advance loans.

Well, since it is quick to avail and quick to pay back, there are some people who avail of the salary loans when there is a need to pay for emergency situations like car repair, family expenses or utilities or on the spot medical expenses. Some might have gadgets that just cannot wait until the next salary and need to be paid off soon.

There are many ways to categorize Salary loans. It might fall under Personal loans, Mortgage or Medical loans depending on why the borrower needs to spend the money. And because of the range of uses this loan has, many companies have added Salary loans as one of their services.

If you are thinking about applying for a salary loan think first if you are responsible enough to pay off this loan. You must keep in mind that all types of loans (may it be Mortgage, House, Car, Educational etc.) are debts. 

Given this one should be very careful and pay off the loan on or before its maturity date to avoid additional debts. It might be wise to check The Advantages and Disadvantages of Loans before going ahead and applying.

In the company, the salary loan is available to regularized employees who:

  • Has no existing company loans.
  • Earned a good moral standing based on the company’s code of conduct and existing policies. (No Incident Report for the past 3 months from the time of application).


Additionally, the company will allow regularized employees to avail the personal cash advances for emergency purposes such as sickness, death of an immediate family member, natural disasters, and other events that need immediate cash assistance.

The process of applying for a salary loan is as follows:

1. The employee must fill up the form, ready-made by the HR department located at the company’s OneDrive and in the HOIT public folder. In there, the employees can locate the salary loan form. Refer to the form format through this link: https://forms.office.com/pages/responsepage.aspx?id=a3W2Q_2ndEmZfXQiL7lYIS4PXzPSccZHuxUjDyYbQy1UOUEyR0VZQ1dGQzVZWjE4WUI4NFBYM0dNViQlQCN0PWcu


The form contains the following:

  • Requestor’s Name – the name of the employee requesting the loan.
  • Department/Section – the department in which the employee belongs to.
  • Department Head – the name of their department head or team leader.
  • Date Approved by Department Head - the loan must be approved by the department head or team leader prior to filling up of the form.
  • Requested Loan Amount (PHP) – the amount to be loaned.
  • Reason for Availing Loan – the reason why they will avail the cash assistance.
  • Repayment Schedule - either one deduction of the total amount (in the next pay period) or repay over multiple pay periods (e.g. every 10th and 25th of the month).


2. Upon creating and sending the form, the employee must also create and sign a promissory note stating that they will in fact pay for the loan and not run off with it without even paying. The needs to be notarized by an attorney at law for legibility. Refer to the format of the promissory note through this link: https://hoit-my.sharepoint.com/:w:/r/personal/hazelp_houseofit_com_au/_layouts/15/Doc.aspx?sourcedoc=%7B8AC11B3C-171C-44FF-87E6-31630EE89ECE%7D&file=PROMISSORY-NOTE-_Employee%20(1).doc&action=default&mobileredirect=true&DefaultItemOpen=1&ct=1625804375500&wdOrigin=OFFICECOM-WEB.MAIN.OTHER&cid=b28594a9-2969-4824-8e97-fa305b40ed86


The employee must attach the filled up promissory note along with the notarization in the second part of the salary loan form.


3. HR will then create an action in Strategy X for the CEO's approval of the loan.


4. The CEO will be the one to approve/decline the action with comments.

 

5. HR will provide feedback to the applicant of approved or declined application.

 

6. HR will create an action for payroll & timekeeping to process the approval if applicable.

 

7. Payroll & timekeeping will store a copy of the loan application on the employees 201 file.


Here are some of the guidelines the employee must follow when requesting and granted a salary loan: 

1. The authority to deduct form should be acknowledged by the employee. Employee’s email access and approval of the form is legally binding.


2. Salary loan should be paid within six months and commencing on the next pay period after the loan amount was received.


3. Employee is allowed to loan up to the equivalent of their one-month basic salary or whichever is lower on the amount needed.


4. The processing time takes up to one month maximum from the date the loan has been applied.