It’s nearly Christmas but we haven’t received our salary yet. We have a lot of shopping to do, for your children, nieces, nephews, or even yourself. However, you do not want to wait till the last minute to go shopping as shops will be crowded, and in this pandemic situation, you do not want to take any risk.
But the only problem is that you haven’t gotten your paycheck yet and do not want to tap into your savings (because this is a very bad habit). Wouldn’t it be nice if you could receive a small part of your paycheck earlier? Then you could consider a salary advance.
What Is A Salary Advance Loan?
A salary advance is a loan that you take out against your next paycheck. In essence, you get paid ahead of time. You can use the money to cover an unexpected need, such as auto repairs, and then repay it when you are paid. Salary advances, like other loans, include a payback schedule, interest charges, and other fees.
Salary advance loans are compensated on your next paycheck. This means that the loan and interest will be deducted from your paycheck, depending on the terms and conditions of the advance payment.
However, you should make the difference between a salary advance loan and a payday loan.
Salary Advance Loans Compared To Payday Loans
The most significant distinction between salary advance loans and payday loans is who provides the loan and the repayment conditions.
Your company provides you with a wage advance. Some businesses provide advances to employees in the form of private loans. Other companies support a credit union that is only for their employees. Salary advances are frequently provided through your credit union account by employers who work with credit unions.
This is a significant distinction from a payday lending company. It also allows you to get better loan conditions than you would get from a payday lender, a credit card, or another short-term financing alternative. Unlike payday lenders, your company or an employer-sponsored credit union is not attempting to entice you into a debt trap.
But keep in mind that not every employer offer a paycheck advance, now we will look at why some employer provides salary advance loans, and some don’t…
Why Some Employers Offer Salary Advance Loans?
So, why would a company grant a salary advance in the first place? They believe that giving you your compensation in advance is advantageous to them. However, what is the advantages of your company providing a pay advance? There are two primary reasons for this:
1- There are various reasons why some people want to have an advance salary loan; some are in real financial distress situations where this can affect their work. For example, if your car breaks down and you have no means of transport to come to work, your employer may want to grand you with the salary advance loan.
2 – Employers may provide advancements to employees who contribute to strong workplace culture. An advance might assist an employee in getting through a difficult period. The employee believes their boss cares about them and is proud to work for them.
Is Everyone Eligible For Salary Advance Loans?
This is not static; it depends on your employer; for example, some employers won’t grant you an advance to buy gifts but mostly for real issues like car repairs, medical difficulties, and emergencies. Keep in mind that an advance is similar to debt; this money isn’t yet yours. So, you do not want to spend it on things that are not important.
There are some recurrent qualifications when it comes to granting a salary advance loan, for example, length of employment, the reason for advance, and your standing in the company. Some companies do not offer an advanced program at all, so do not be surprised if you learn that yours don’t.
Let us know in the comments what do you think of salary advances…