Difference Between Loan Policy And Advance Policy

Dear Friends,
Can anyone let me know the difference between Loan opolicy and advance policy? . I am a bit confused on that ...Also need templates for the same .
Thanks and Regards,
Anuja

Dear Anuja,

Loan refers to a significant amount of money provided to the employee for a specific / valid reason.

Few Standard clauses in loan policy are : -

Minimum Years of Service Rendered (Example 3 or 5 Yrs)
Nil History of Loan Pending
Eligibility will be set basis Grade / Monthly Basic or Gross

Reasons for application of Loan might be Educational , Marriage , House or Hospitalization

The entire sum of loan availed will be split into EMIs (with or without interest , depends on company policy) and deducted in equal installments from the employee salary

Advance is a insignificant or smaller amount provided to an employee for meeting any petty personal expenses in case of contingency

In normal instance advance will only be a small percentage of the salary and will be deducted in the next salary disbursement

Company might also opt to pay travel advance ,which needs to be settled by the employee with details explanations and necessary supporting within stipulated time frame

Hope the info is clear

Dear Sriram ,
Thanks for yor prompt reply .Now i know that i need to frame an loan policy for an organisation .
Just a little bit for more help .Can you let me know what iss the standard percentage for availing loan i.e 1.5 times of gross or basic or 2 times etc ...
Regards,
Anuja

Anuja,
Normally it used to be 2 times the Gross Salary or a specific amount which ever is lower
Repayment Time Frame : 10 Equal Installment from subsequent month
Interest Rate : Depending on the company policy, some companies charge 10 - 12 % Interest
For instance if a company has a policy of 2 times the Gross / Month or Rs 25000 which ever is lower as the eligible loan limit
Employee A with a Gross Salary of Rs 10000 / Month will be eligible for Rs 20000 as Loan
Employee B with a Gross Salary of Rs 15000 / Month will be eligible for only Rs 25000, as the 2 times gross is higher than the limit fixed
Certain companies doesn't fix any limits but leads to huge amount being disbursed as Loan, this will adversely affect the liquidity of the company
When you frame a loan policy be careful with all these aspects and consult the top management , with regard to the eligibility, time frame for repayment and interest applicable, if any.