Loans From Your Employer

In case you needed a new way to go into debt, Marketplace has a story about employees taking out loans or cash advances from their employers:

Let’s say someone has a car that breaks down. Gotta get it fixed, right? But what if this person doesn’t have the money?

“Unfortunately, many of our consumers don’t have access to traditional bank credit,” says Ken Rees, CEO of Think Finance, a workplace lender out of Fort Worth. A lot of his “consumers” are restaurants workers, hotel staff, even teachers and nurses. And he says a lot of times, they can’t get emergency credit.

“It’s the choice between this product and a payday loan or this product and no access to credit at all,” he says.

That product he’s talking about is called Elastic. It lets employees borrow money through their employer. At Think Finance, a worker can get a line of credit, up to $1,000. There’s a 5 percent fee for cash advances. Plus, other fees for higher loans — the bigger the loan, the higher the fees.

“They can get onto the website. We’re able to ping that payroll system, know that they’ve been paid a certain amount, know that they are who they say who they say they are, and then we’re able to feel confident giving that customer the credit that they need,” Rees says.

How much credit depends on things like how long a person has been with a company, and credit history. Employees can repay the loans by check or in cash, but usually these loans are repaid directly from a paycheck.

What are the interest rates on these loans? One company that handles these types of loans, FairLoan, says “they’re meant to be affordable, with interest rates starting at 18 percent,” which — do they know what “affordable” means?

If I needed emergency money, I would look for it anywhere besides an employer — having that debt at your place of work sounds like bad news.

Photo: Phil Whitehouse

Support The Billfold

The Billfold continues to exist thanks to support from our readers. Help us continue to do our work by making a monthly pledge on Patreon or a one-time-only contribution through PayPal.