A loan offered to salaried individuals by their employer is called a personal loan. Such an account is opened on behalf of the employee to specifically transfer the monthly employee salary directly into the bank account.

Earlier, employers offered salary cheques to be deposited by employees physically visiting the bank or institution branch. Since adopting personal loans, the time and efforts related to cheque submission and process have decreased subsequently.

For employers, the procedure involved in a personal loan is convenient since a bank representative is physically present and handles all the procedures involved online. Once a personal loan is successfully applied, the bank transfers the loan amount on the payment day of the month after collecting it from the employer.

Why opt for a personal loan?

Opening a personal loan for an employee is convenient for employers; it offers an array of facilities to both the employer and employees. With the personal loan online facility, either the employee or the employer can apply for a personal loan from anywhere using a desktop or laptop. The procedure involved in a personal loan is straightforward and can be done through the institution’s official website. Here are a few reasons why one could consider opening a personal loan:

No minimum balance

Since there is no-minimum balance offered, the penalty and charges levied are omitted entirely from the personal loan.

Interest rate

Some institutions, based on employer and colleague accounts, can offer some of the best interest rates on deposits and savings. One can opt to hold the salary for a long term to earn a good amount through interest.

Employee benefits

ATM transactions are critical for account holders for various reasons. Some personal loans offer more free ATM transactions than that are allowed to a savings account holder. They might increase the account holder’s daily cash withdrawal limits.

Employer benefits

Employers with hundreds and thousands of employees can opt to open personal loans for all employees at once. Bank representatives are often present on the employer’s premises to ensure efficient and hassle-free procedures are followed for each personal loan to open.

Features of personal loan

Zero Balance account

Any savings account comes with maintenance charges and minimum balance criteria. The minimum average balance has to be maintained within every quarter in the account or else, a penalty is charged to the account. A personal loan needs no minimum balance requirements. The account holder can maintain it without any funds for months with no penalty or extra charges applicable.

Online loan services

The personal loan with the unique number and details can be accessed online or logged in through a mobile phone application. After a personal loan online, just like any savings account, it can be utilised for monthly bill payments and subscription payments with the least effort.

NEFT and instant fund transfer services

After an personal loan online, the personal loan can be used to perform NEFT transactions and instant fund transfers. NEFT service is offered by RBI (Reserve Bank of India) for a transparent digital money transfer.

SWP & SIP

A systematic withdrawal plan (SWP) is availed in the personal loan to withdraw a fixed amount every month to another account. Also, it can help employees attach the account for a SIP (Systematic Investment Plan) for mutual funds from the personal loan.

Linked demat/trading account

Personal loan links with the demat account and the trading account. Some institutions offer to open a default demat account when opening a personal loan for an employee. It helps employees use the same personal loan for transferring funds to the linked trading account.

Loan priority

When an employee holds a personal loan with a particular NBFC, the employee can be allowed to apply for a loan through that institution. The details and documentation process takes less time since an account already exists with the bank. A personal loan holder can be offered lower interest rates than competitors through the income amount, employer details and other bank transactions.

Conclusion

A personal loan offers a smooth transfer of funds from the employer to employees. Personal loans are opened in bulk quantities and omit a lot of paperwork from the employer. The salaries are credited quickly within the same day instead of the three days waiting period for cheque payments. Other frequently used services offered are mobile & phone banking, locker services, demand draft and overdraft facilities for personal loan holders.