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8 Tips for Loans to Employees in South Africa - Low Interest Rate

If you are lucky enough to enjoy from a permanent job, you might be able to also enjoy from a different type of borrowing money. In this opportunity, I want to inform you about loans to employees in South Africa. As you well know, you can ask money to a financial institution, but you might also get a staff loan from your employer. As there are various types of employees, you will read about some fine options on this topic. I’ll refer to this alternative, and I will also refer shortly to loans to directors. My intention is to prepare you no matter which of these situations you need to go for. If you pay attention to these 8 questions I’ll answer next, you’ll get useful tips to get a low interest rate loan.

1- Can employers give loans to employees?

Yes, in South Africa it is legal that employers give loans to their employees. There are two options to do this.

·         One alternative is when the employer doesn’t try to get profit from the loan and, it doesn’t charge interest on it. In this case, we can say the employer is just trying to help his or her employee to get though a rough path. Either way, the borrower must pay the loan back on proper time.

·         The other alternative is when interest and fees are charged by the employer when the loan is issued. I’ll develop this option in the following question.

2- Can an employer charge interest on a loan?

As I have just said, charging fees and interest is an option for staff loans. All the same, in this case, the employer - that is to say, the lender- should comply with the requirement for any money lender. What do I mean? As in any lending money situation, the lender must be a registered credit provider and issue the loan under the NCA. This act establishes interest rate must be stated respecting certain values. For example, it shouldn’t be higher than a sated percentage.

3- How are loans to employees’ payments in South Africa?

Payments are always stated at the beginning of the loan contract negotiation. There, your employer will make you the loan offer detailing the number of instalments and the amount of money you will have to pay per each of them. Now, as you’re dealing with a staff loan, one of the most common possibilities is that your employer deducts the instalment from your salary. This means that when you are paid, you’ll receive your wage with the loan instalment deducted. In turn, you won’t have to worry about remembering paying for the loan.

4- Is it better to go for a normal company loan if you’re an employee in South Africa rather than a staff loan?

Whenever a “which is better” question appears, I clarify that most of the time, the answer depends on the client. If you get a low rate offer from your employer, you should really consider taking advantage of that alternative. All the same, the only way to find out is by researching loan companies’ alternatives. For example, read about African Bank and FNB to have an idea of what’s the loan market offering. Then, you’ll have enough information to choose wisely.

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Adding up to this information, there’s a loan simulator you’ll find right here in our platform that, if used wisely, you can be steps ahead when choosing who to ask money from. Thisfinancial tool will present you some estimate loan costs from different South African banks and credit providers, and you will know which is the cheapest option.

5- Where can I get personal loans for government employees in South Africa?

If you work for the Government and need a cash loan, you can be sure you’ll find endless loan offers. This, of course, assuming you have been a responsible South African with your finances and haven’t got any late payment, for instance. As you can provide any bank with proof of income, you have chances of being approved for a loan. Then, to decide the company to take the loan with, you just must focus on the type of loan you need like loans without payslips.

6- Can government employees get home loans in South Africa?

Home loans for government employees have a special program. There, you will be helped by the Government Employee Housing Scheme, commonly referred as GEHS. If you work for the SA Government, you should enrol with this Housing Scheme to be allowed to enjoy from their benefits. One of the GEHS partners is SA Home Loans, which is one of the most reputable financial institutions in South Africa when it comes to home loans. Evidently, you will have a good experience when deciding to make your house ownership dream come true.

7- How are loans to directors?

It can happen that a company is funded in terms of directors or shareholders pouring capital in the company. In exchange for that capital, shares are granted to them. In addition, that investment can be recorded as a loan that the director grants to the company. As such, the company then, has a credit that should give back. Fortunately, there are several options the company can choose to repay that money, especially considering the creditor is the director.

8- Do banks offer short term loans to directors?

On the other hand, if you are a director and you’re looking for a personal loan, I must talk about a different instance. In your case, you need to look for a company granting loans to business owners. It’s not that difficult to find, but you must make sure you’re in good hands. In order to make sure of that the creditor must know how to manage your loan terms taking into account your source of income derives from a business.

In these 8 questions, I have accomplished my goal of informing you about other methods to get loans. I have explained how staff loan works and, I have also told you about how borrowing money works within company’s members. Now, I can only tell you to leave me any specific query about loans to employees, so I can elicit whatever doubt you might have.

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Questions and answers

Is it compulsory for a company to give loans to their employees?

No, staff loans are not compulsory. When you’re hired, you need to read your labour contract to know if your employer offers this option. If this information is not detailed in it, you will have to ask your boss to find out, but it probably means that’s not a possibility.

My boss says she needs to do a credit check to lend me money, can she do that?

Yes. In fact, she must do a credit affordability before lending you money to make sure you can enter a loan contract, as with any bank would do. If you can’t afford the loan, she shouldn’t grant it to you. Remember these checks are thought to prevent borrowers from getting payments they can’t afford.

What if I’ve just started working this month, can I get a staff loan?

That is a decision your employer should take so, he or she will study your situation to decide. Bear in mind that if you have a good credit record, a positive answer is possible. As long as you demonstrate you’re a reliable borrower, your chances to get economic support are good.

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