THE CASE FOR PAYROLL LENDING
Why is payroll lending less risky to the underwriter?
Because payroll lending allows for collection at source, underwriters are able to offer significantly more competitive products to open-market, non-payroll collectable loans.
- Members of staff at numerous large companies are already customers of micro lenders. And, unfortunately, many are also customers of potentially unscrupulous, unregistered lenders. Should these companies consider payroll lending either via their own funding or with a credible funder, they would be able to offer significantly better rates to staff who need to borrow.
- There can be no doubt that offering such benefits would be viewed positively by the more powerful unions. In fact, this could potentially lead to business opportunity for the unions to become active partners themselves.
- Payroll lending presents companies with opportunities to track financial behavior and stress levels amongst their workforce. It can also offer the appropriate advice, counselling or other actions that are deemed necessary. These are all highly positive actions that will inevitably contribute to more stability within the workforce.
- Companies wishing to fund staff loans would also be able to generate profitable returns without having to resort to exorbitant rates since they control collections and affordability. Furthermore, many large organisations are already registered as financial service providers.
- Companies could introduce a range of financial services offerings ranging from lending, insurance and savings plans. By way of example, introducing a savings plan linked to specific retailers would allow staff to access preferential prices for large ticket items. This could introduce a whole new dimension of lay-by purchases.
Key benefits of payroll lending
- Preferred product pricing through bulk purchasing and loyalty programmes
- Over time, responsible lending leads to socio-economic improvements
- It can encourage saving by introducing savings plans
- It provides tailored financial offerings to employees based on a more informed view of their circumstances and requirements
- By consolidating debt at significantly lower rates, due to collection being at source, employees can escape the debt-trap by debt consolidation.
The spin-off effects for the company in terms of preferred employer status in the market are obvious.