Salary-backed loans: everything you need to know

The Salary-backed-loan is a financial solution for employees with a permanent contract and pensioners (up to age 85) for obtaining liquidity to implement several medium-long term goals.

Mara Casagrande, Marketing, Back Office & CRM and Recruiting Coordinator of Capitalfin, explains how this product works.

What is the difference between a salary-backed-loan and a personal loan?

For a salary-backed-loan the instalment agreed is deducted from the salary (or pension) and paid to the Bank that allocated the loan every month, by the employer and/or the Pension office for pensioners.

With personal loans, the instalment is repaid to the bank/financial institution directly by the person requesting the loan in an agreed manner (e.g. current account debit, postal bill).

How long does allocation take?

One of the advantages of a Salary-backed-loan is definitely being able to receive the loan in 10/15 days.

What does the insurance connected to the Salary-backed-loan cover?

Since the Salary-backed-loan is strictly linked to the customer’s monthly income, the product foresees an insurance that protects both parties involved; that service covers two risks:

Life risk (Employees and Pensioners): guarantees the loan not being repaid to Capitalfin by the customer in a case of death occurring before the loan’s natural expiry date. If that occurs, the insurance company cannot ask the customer’s heirs to pay back what was paid to Capitalfin.
Employment risk (Only for employees): guarantees the non-payment to Capitalfin of the loan by the customer if the employment between the employee and his/her employer should cease permanently. The policy guarantees repayment of the part of the remaining debt not possibly covered by any severance pay existing when the employment ceases. If the insurance company has to pay the indemnity, it does however have the right of recourse against the customer for the amount settled.

Why is the salary-backed -loan worth it?

The instalment may never exceed one fifth of the monthly salary/pension and this avoids an excessive level of indebtedness; therefore, guarantees maintenance of a good expenditure capacity even while repaying the instalments.

Capitalfin experts always recommend declaring and weighing one’s financial commitments and expenses, so that the consultant can recommend what is best for the customer and agree on a sustainable instalment based on his/her economic conditions.

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