I have made this mistake once before and thought I’d share my experiences. Here’s why I believe you should not opt for a loan from your employer:
- Any loan from your employer ties you to your job. You can’t come out until the loan amount has been cleared in full. You might argue that you can always ask your new employer to bear the loan. But where does that take you? From one chain to the next? Plus, I’m not sure if any employer today would be willing to bear existing loans.
- It’s psychologically debilitating to see your take home salary cut by the EMI (Equated Monthly Installment) amount on the loan even before it’s credited into your salary account. I used to end up getting frustrated when this continued to happen each month, but they served as a good reminder of my mistake and actually motivated me to get out of the situation.
- There’s a hidden cost. Though you do not actually pay any direct interest on the loan amount, the notional interest surfaces as a perquisite in your income tax calculations and adds directly to your taxable income. I didn’t know this fact until I saw my income tax calculations; it was already too late.
With some fanatic fiscal steps, I managed to come out of this situation sooner than I thought it would take. I know I will NEVER repeat this mistake again. Once was good enough a lesson for me.
What do you think? Do you have an experience to share?
On the contrary, it aint gonna be a bad idea if ur company sponsors u for an MBA and retakes u back @ managerial positions, that way you dont have to indulge in the process of job hunt, you get a position boost and a higher pay hike as well, dont forget you still have to pay EMI’s if you are not borrowing loans from your employer as you still have to borrow loans from any local or international banks,unless & until you are son/daughter of vijay mallya or lakshmi mittal who can finance ur education without loans, the end result may be the same in both cases, as in the former it may add some value to the position in your company..
@ your last point, you still have to pay income tax even if you are paying loans, but the tax paid will be much lesser, but the rest goes to loans asusual. I bel only way u can avoid tax in India is through real estate business..
It wont be a good idea though to borrow loans for education from your employer, if you don’t want to rejoin them or just waiting to get away from them for ever..