Current Events > Financially savvy people on CE. What would you do? (weird situation)

(+) Yeah! (+)

My company offers an interest free loan up to 10k, no questions asked. The repayment length is agreed and the payments are deducted from your monthly paycheck. The obvious incentive here is that once you owe the company money, you're less likely to leave.

Some people in the office have taken up this offer for things like gaming computers, new cars, etc.

I'm sitting here thinking...why not just stick that in a high interest savings account and leave it? If I borrowed 10k and set the repayment length for 5 years, then in that time I'd earn probably +2k in interest.

As for an exit strategy, I could take out a personal loan to cover the rest, right?

Yeah, that seems like a good strategy if it's truly an interest free loan.
Do remember tho, that because of inflation it's hard to say if it's a 100% yes.

Eh But are you going to be with the company in five years?

I'd double check that it's not going to incur tax or NI. I'm not an expert on these things, but it sounds like an employee benefit.

That sounds like a good strategy.

Turbam posted...

Do remember tho, that because of inflation it's hard to say if it's a 100% yes.

Why would inflation be an issue?

Hexenherz posted...

Eh But are you going to be with the company in five years?

This is why I'm hesitating.

If I chose to leave in say 3 years, I'd have to pay the company back 4k. In that time I'd have generated 1k, which is ok but if I then had to take out a loan to pay back the rets of the amount immediately then it would basically not be worth it.

Why would you not just withdraw what you need from the same savings account you put it in to pay them back? I assume you can just do that.

LeCh0nk posted...

Why would you not just withdraw what you need from the same savings account you put it in to pay them back? I assume you can just do that.

That's true. I suppose there's a non-zero % chance that I actually use that money at some point.

I'd double check the fine print but at its face I'd hop on that immediately.

Even a year's worth of growth (or matching inflation) is better than nothing. If you bail after 1 year, that's still something.

pinky0926 posted...

That's true. I suppose there's a non-zero % chance that I actually use that money at some point.

If you're not confident you can resist using the money at least until you can easily pay back the remainder, don't do it.

Also if you use the money, it's not in the account collecting interest, which defeats the whole purpose.

action52 posted...

If you're not confident you can resist using the money at least until you can easily pay back the remainder, don't do it.

Also if you use the money, it's not in the account collecting interest, which defeats the whole purpose.

This is a good point.

I originally looked at the offer because I thought buying a car on an interest-free loan is better than a regular car loan, but then I realised...wait, this could actually make me money.

I think your plan sounds good, and since it is a benefit, if you don't do it, you are effectively not receiving your full pay. As said above, do not touch the money until the loan is due, so you can get the full effect of compounding interest. Maybe a 5yr CD would help you with that?