The payroll loan is a type of loan that is automatically charged to the person's paycheck or social security benefit. In addition, their interest rates are much lower compared to other types of loans.
But you know how does the payroll loan work?
At a time of financial crunch, many people are looking for alternatives such as borrowing to pay off urgent debts and not have their name negative. Is this your case?
The payroll loan for EHIC retirees and pensioners is with new rules, understand how he can help you at this time.
But just like any other type of loan, it has its specifics and points of attention. Want to know what it takes to hire you? Follow today's post to clear all your doubts. Come on?
What is a payroll loan?
The payroll loan is a type of loan with guarantees, as its installments are deducted directly from the salary or retirement person's.
In practice, this means that a part of the income will be compromised even before the consumer has access to the value.
For this reason, the interest charged by banks is usually lower compared to other types of loans. After all, the risk of installments not being paid is low, since the value is paid automatically.
However, even though it seems to be a good option for times of stress, it is necessary that you know exactly how the payroll loan works. Since it is a loan like any other.
How does the payroll loan work?
The payroll loan works with a consignable margin, which is a limit value that can be discounted. Thus, the amount released will be according to the person's income.
Within this modality, there are two subtypes you can choose:
- personal loan: when you request the full amount from the bank and pay the monthly loan installments;
- payroll credit card: works like a common credit card, but the amounts are deducted directly from the payroll or EHIC benefit.
In the first option, you can split the amount in up to 84 times and have up to 9 loan contracts at the same time. Interest can reach up to 1.8% per month. The second has maximum interest of up to 2.7% monthly.
Meet the new rules on the operation of the payroll loan:
Who can take out a payroll loan?
The payroll loan cannot be contracted by all people, only for those who have a fixed monthly income.
In this way, the following groups can make a payroll loan:
- workers with a formal contract;
- retired people;
- public servants;
- military personnel of the armed forces.
How to hire payroll loans?
The documentation required for the payroll loan is simple, it is enough for the person to take it to the bank:
- proof of current residency;
- proof of current income.
The available amount will be according to the person's income, as it is necessary to respect the assignable margin. This means that there is a maximum salary that can be committed to pay this type of loan.
There is a law, nº 10.820 that determines the maximum amount of the installment of this loan with up to 35% of salary of the consumer. In addition, 5% of this limit can only be used on the payroll credit card.
In addition, to contract the payroll loan, other types of analyzes are carried out. A credit analysis is performed that takes into account the applicant's credit score and financial profile.
Do you know what credit score is? If you want to know more about the subject and understand how to increase your score, we suggest reading the article: ‘How to increase your credit score: 4 tips to put it into action NOW.
In the analysis, in addition to the confirmation of documentation and registration with the EHIC, the bank will basically assess the applicant's consignable margin through the payment statement, which can be easily withdrawn online, in order to offer the terms and values of the agreement.
Therefore, it is essential that you keep your data up to date and even make an inquiry of your consignable margin before applying for a loan.
This way, you will already have a sense of what amounts and interest rates will be available for your order, which helps you to avoid errors and incompatible orders
Then, if the proposal of the banking institution is approved by the beneficiary, the next step will be to sign the contract and send it to the EHIC for registration. All these steps can be performed online.
Is it worth taking out the payroll loan?
As with any other type of loan, there is interest on the payroll loan. Therefore, it is necessary to evaluate each type of situation. It can be an ally or enemy of your budget, as it commits part of your monthly income.
Therefore, it is always necessary to be careful when hiring. Understand below when it is worth taking or not this type of loan.
We know that sometimes we need to get out of bigger debts or fulfill a dream, like buying a home, and therefore we need to take out a loan.
So, we have separated the pros and cons of the payroll loan for you to evaluate if this is a good option for you:
Advantages of payroll loans
The biggest benefit of how the payroll loan works is, of course, the interest amounts. They are the smallest on the market due to the highest payment guarantee. In addition, they usually have pre-fixed rates, that is, the contracting party will know the amounts to be paid at the time of the contract.
Agility in approval
As they are low risk, credit analysis and loan approval are much faster. On average, after the return of the person's credit analysis, it takes 48 to 72 hours for the loan amount to reach your account. The operation is done completely online.
To find out if the payroll loan has been approved, it is enough for the contracting party to follow its process through the APP or website of the My EHIC.
Ease of payment
By being deducted directly from the payroll or EHIC benefit, the risks of non-payment are reduced. So, it doesn't matter if the person forgets the day it is billed, the amount is automatically deducted.
Less risk of default
O automatic payment also reduces the chances of default. Thus, it is not possible for the person to commit the amount allocated to the payment of monthly fees with other debts.
Financial institutions often offer longer payment terms on the payroll loan. In some cases, banks even offer 120 months to pay off the debt.
Disadvantages of payroll loans
Risks of losing your job
One of the main questions about how the payroll loan works is this: what happens if I lose my job?
Considered one of the main cons of this type of loan, if you lose your job and work in a private company, you will have to pay off the debt at once.
If this is not possible, you have the alternative of changing the type of loan, but the interest amounts will probably be more expensive.
In addition, it is common for banks to discount even 30% of the amount received on termination. Therefore, it is necessary to pay attention to the contract.
long term debt
The payroll loan payment period is very long, this can be an advantage or disadvantage for the person. We know that unforeseen events happen at any time and having part of the monthly salary compromised can be a disadvantage.
It is not possible to postpone installments
The discount is made directly from your payment, so you will not be able to defer or suspend the debt. You may also find it more difficult to renegotiate the loan if you have this need.
Are there alternatives to the payroll loan?
By knowing how the payroll loan works, it is easier to understand whether or not it is the best option for you.
If you want an alternative for financial emergencies, you can have the option of advance your salary or thirteenth. But how to do this?
HR Consultant UKy is a financial platform developed by HR Consultant UK that can be an alternative to payroll loans.
An excellent option to reduce negative situations, as it allows employees of companies that use the platform, request part of the salary at any time of the month or ask for the thirteenth advance payment, thus avoiding the indebtedness of employees.
When using salary advances through HR Consultant UKy, the employee pays a fee of BRL 2 to BRL 9 reais, much lower than the interest rates charged on loans, cards and overdraft facilities.
HR Consultant UKy is available to all employees on a CLT basis and does not rely on credit analysis.
Now that you know how the payroll loan works, you can choose the best option for your situation.
Like other types of loans, it has advantages and disadvantages. Therefore, correctly analyze your conditions and financial profile. This is essential to not end up indebted further.
Have you ever taken out a payroll loan? Tell us about your experience with this modality in the comments below!
HR Consultant UK can help if you have any questions about How does the payroll loan work? understand who can do
. Our HR consultant in London can assist you if you live in London. Suppose you live further afield thats not an issue! Visit our HR Consultants Near Me page to find the best consultancy nearest to you.
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