Do you have employees asking for loans? 

Then you may be experiencing a larger issue: your workers may be struggling to make ends meet with their current finances.

This is common among nearly 50% of workers across America.

The first sign of this happening at your workplace? Your employees asking for pay advances, loans, or raises.

How You Can Help: Common Employee Loan Options

Here are some loan options employees can consider:

  • Retirement Loans are loans taken from the employee’s retirement accounts usually 401k or 403b where they borrow against previously made contributions
    • Pros
      • No credit check is necessary
      • Generally lower interest rates
      • Payments are directly deducted from your paycheck
    • Cons
      • 10% penalty likely subtracted
      • Most loans require 5-year payback term
      • If employee loses job, most loans are due immediately
      • Slows down saving for retirement 
      • Payments are directly deducted from your paycheck
  • Pay Advance Loans/Accrued Wages provide access to your wages before payday arrives
    • Pros
      • Easy way to access small amounts of money
      • No or low interest rates
      • No credit check needed
    • Cons
      • Generally limited to amount earned
      • Often comes with fees
      • May become dependent
  • Alternative Options
    • Loan from a credit unionClick here to find a credit union near you
      • No credit check
      • Affordable terms
    • Delay a bill—Many bill collectors will offer flexibility if you reach out and work with them proactively (ex: restructure due dates, delay student loan payment)
    • Reduce an expense—Cut back on eating out, expensive cable packages, expensive cell phone packages, overpriced gym memberships, and more
    • Borrow from family—Make sure family members are aligned and repayment terms are clear to avoid miscommunication

Help Your Employees Evaluate Loan Options 

Discussing personal finances with your employees isn’t easy.

The next time they come to you for help, it’s likely because they trust that you can help and/or they feel it’s their last resort.

Simply speaking with them and providing options can make a positive impact on them.

1. Explain the options you have internally, if any.

Note: It be the first time they hear about a possible solution

2. Share this worksheet. They can quickly see:

  • The pros and cons of different loan options
  • Other options they might not have thought of
  • Terms of the loan
  • What it will mean for their budget

When giving them the worksheet, you can also review the “Fill in the Blank” section to forecast a potential loan they might take out. While going over the section make sure the employee understands all the important figures:

  • Loan amount
  • Duration
  • Monthly payment
  • Interest rate
  • Amount deducted from paycheck

Taking the time to go over how the new debt affect him or her can make a difference in your employee’s life.


Have employees getting their wages garnished?

Get the employee wage garnishment worksheet too.

How our nonprofit can help further

When you see your employees struggling to pay bills, it’s hard to know what, if anything, you can do about it.

But there ARE things you can do as an employer to reduce your workers’ reliance on loans and advances, break them out of the cycle of debt, and help them achieve life-changing financial stability.

Neighborhood Trust Financial Partners is one of the nation’s leading providers of financial empowerment services. With over 20 years of experience, we have served over 50,000 people. Neighborhood Trust is the largest provider of financial coaching services for the New York City Office of Financial Empowerment and was named a CFSI Financial Health Leader in 2017 and 2019.

We aim to help workers reach their financial goals by supporting them with tailored one-on-one financial coaching with our trusted Financial Coaches. Neighborhood Trust empowers individuals to become productive participants in the U.S. financial system and achieve their financial goals in a safe and confidential environment.

“We don’t just coach or educate. We work with clients to build financial plans, change financial behavior, and access socially responsible and affordable financial products.”

Learn how Neighborhood Trust’s holistic financial coaching program can help your workers.