What is an employer loan?

An employer loan is a form of credit. Employee loans from companies are preferably used to strengthen employee loyalty. An employer loan is a loan granted by an employer to an employee. The employee loan is not granted and paid as consideration for the work performed by the employee.

Credit from the boss and his requirements

The employer loan can be a cheap financing alternative to a conventional bank loan. The employee loan is usually at a lower interest rate. It is mainly granted by companies in order to bind employees to the company and to bring them esteem and thus also to offer them a secure job for the near future.
When it comes to granting loans to employees, the principle of equal treatment under labour law generally applies to all employees. For example, full-time workers may not be granted more favourable loan conditions than part-time workers. Nevertheless, an employer does not always have to grant a loan to all employees. An employee loan can also be refused if the employee is indebted or if wages are garnished.

earmarking, maturities, loan amounts

As a rule, employer loans are earmarked. They are usually paid out for special training measures or for the purchase of real estate. Employees can also take out an employer loan if they want to finance company shares. Here, however, the employer must inform the employee before granting the loan about the risks that may arise in the event of the possible failure of the IPO.
An employee loan may not be granted for the purpose of acquiring proprietary products.
The maturities of employee loans are usually between 6 and84 months. If the employer loan is used to purchase a property, the term can also be up to 25 years.
Employer loans can be taken out from a few hundred euros to several hundred thousand euros.

Fees and interest rates

As a rule, there are no fees for employer loans. If the employee loan is granted for a property, the company bears the fees incurred for this. The conclusion fee can amount to 1 to 1.6 percent of the sum in the case of financing via a building society. If a building savings contract is quickly brought to the point of allocation with the help of an employer loan, then fees in the form of damnums may also be incurred for full financing. Processing and closing fees can be claimed by the company in full for tax purposes.
If the loan from the employer is a direct loan, the amount of interest can be freely chosen. However, the effective interest rate is usually significantly lower than that of other loans. The interest rate can either be fixed for the entire term or linked variably to a reference interest rate. Here the Euribor or the ECB key rate can be used. Many entrepreneurs often use the interest rate for mortgage loans with a 60% loan-to-value ratio to determine the interest rate.
As a rule, employee loans for real estate are paid out by a building society. Usually, the interest rate depends on the tariff chosen by the company. Building saving loans are usually much cheaper than mortgage loans.

securities

Employee loans without earmarking are usually granted without collateral. The repayment, however, is linked to the salary. In this way, the entrepreneur receives partial security for as long as the employee is employed in the company. is.
In the case of employee loans for residential property, the claim is secured by an entry in the land register.