Interest free loan from employer

ehn101

My employer offers an interest free loan up to 10k on what is intended for travel costs. Is it worth making use of this benefit to use the money to earn interest from say funding circle at 6.5%? The loan would be repayed each month for 1 year.

Nebulous2

It may well not be permitted by your employer. There have been previous posts on here of someone being dismissed for taking a season ticket loan and not buying a season. Ticket with it.

Ebe_Scrooge

Agreed - most employers that offer such loans are very strict about it being used for season ticket purchase only. Unless your employer explicitly states that it can be used for any purpose, then it's not worth risking your job over.

SeduLOUs

Also bear in mind that whilst the loans are 'interest free', in many cases at that sort of value they would be subject to NI payments on a P11d as a 'beneficial loan'.

JKSandy

I know in my company you would be sacked for using a season loan for anything other than that purpose.

barbarawright

We get a free season ticket loan and we have to provide the receipt within two months or the money is clawed back from our next paycheck. Not exactly unreasonable

andyfromotley

Ask your employer if they will be ok with this. (I doubt they wil be but at least you have been above board then)

If so go ahead, but you are having to do quite a bit for a fairly minimal return, given that you repay a 12th each month your average return over the space of a year isnt going to be much.

Also i am guessing that there would be tax to pay on that return? Plus a small risk of non repayment?

TBH honest it all sounds a right faff for at best about £240 return.

Oh and what would happen if you lost your job? i am assuming that your employer would expect immediate repayment? (because you would have been able to cash in the season ticket?).

HappyMJ

SeduLOUs wrote: »

Also bear in mind that whilst the loans are 'interest free', in many cases at that sort of value they would be subject to NI payments on a P11d as a 'beneficial loan'.

A loan for a season ticket and very few other items isn't required to be mentioned on a P11D.


OP ->

You can't use the money for other purposes.

What if funding circle goes belly up? You lose the lot.

You could also borrow money from Sainsbury's personal loans at 3.5% and invest it at 6.5% and earn money on the difference. You can borrow at very low rates over 3 years but you need to give a reason for the loan and your reason would not be accepted.

SeduLOUs

HappyMJ wrote: »

A loan for a season ticket and very few other items isn't required to be mentioned on a P11D.

But if it wasn't used for a season ticket, then it is not a loan for a season ticket, and would probably no longer be exempt.

Just another reason why the OP's plan might not be viable, regardless of whether employer cares what the money is used for.

And I might be out of touch with living out of a city, but what season tickets cost £10k?!

barbarawright

SeduLOUs wrote: »

But if it wasn't used for a season ticket, then it is not a loan for a season ticket, and would probably no longer be exempt.

Just another reason why the OP's plan might not be viable, regardless of whether employer cares what the money is used for.

And I might be out of touch with living out of a city, but what season tickets cost £10k?!

I suppose if you went from somewhere like Peterborough to London first class then it would come to that. I can't believe you wouldn't have to produce some evidence though. We have to show exactly what we're buying and why giving our address and standard route to work

boo_star

barbarawright wrote: »

I suppose if you went from somewhere like Peterborough to London first class then it would come to that. I can't believe you wouldn't have to produce some evidence though. We have to show exactly what we're buying and why giving our address and standard route to work

Yeah, I can't see an employer handing over 10k without asking to see proof that 10k is necessary, and asking for proof that it has been spent on that a few weeks/months later.