Why You Should Never Borrow Money from Your Job

There are many employees who ask for a loan from their job or employees when they are faced with financial difficulties and emergencies. It might seem like a great idea for employees to ask their employer who might be able to give more favorable terms compared to banks and may even be able to schedule dates of repayment with paycheck dates.

But, there are actually many reasons why you should never borrow money from your job and these include the following:

Repayment Might Turn into a Source of Stress

All situations may be different but the moment you ask for a loan so you can pay for recurring and regular obligations such as utilities and rent, borrowing money from your work might actually do you more harm than good.

When you are already struggling to meet your obligations, getting another monthly expense in addition to the rest of your obligations might end up increasing your stress levels.  If this is the case, it might be a better choice to get financial counseling instead of getting a loan that you might not be able to repay.

Your Employer’s Loan Decisions Might Lead to Discrimination Issues

Before you borrow money from your job, it is a must that you review your financial criteria to help you determine whether or not you can pay back the loan.

But, even when your financial health can make you a better loan candidate than your coworker, discrimination lawsuits may occur if the company extends a loan to you but refuses another.

If your job fails to document the exact reasons why they refused a loan to another employee, that employee may even file a suit for perceived discrimination. Surely, this is not something that you would want to happen.

Borrowing Money Can Increase the Tax Obligations of Your Employer

Lending money to employees like you may set up your employer to owe more taxes when the loan is done the wrong way. The term of the loan should be clearly indicated. The loan’s interest must also be applied at the appropriate federal rate than reported as a form of income most of the time.

When the loan is done incorrectly, your employer might become subject to tax obligations or penalties or they might also be charged with doing illegal things when the loan was filed improperly.

It can be very tempting to just borrow money from your job when you need cash right away for emergencies or other similar reasons. However, this option might not always be good for you. You will constantly have to worry about whether or not you can pay back the loan on time. You might also feel the pressure of having to do a good job just because you still have a debt to pay.

The next time you find yourself in a sticky financial situation, it might be best to reconsider things before you even decide to borrow money from your job. This way, you can feel less stressed out and focus on your work better with more peace of mind.

Here you can read a very helpful topic on Why You Should Never Lend Money to Family.