Add a loan on behalf of an employee (admin)

A Loan in HRStop refers to an amount lent by the employer to an employee, which is repayable over a defined or flexible period through payroll deductions.
The loan can carry a fixed (flat) or reducing interest rate, and each repayment (EMI) is automatically reflected in payroll once the loan is disbursed.

Purpose

This article explains how you, as an administrator, can create or manage a loan record on behalf of an employee in HRStop Payroll.
This process ensures the loan details, repayment terms, and deductions are accurately recorded in the system and reflected during payroll processing.

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When you may need this

You may need to create a loan entry on behalf of an employee in the following cases:

• When an employee requests a loan through offline means (email, written application, etc.) and the record needs to be captured in HRStop.
• When finance has already disbursed the loan and the corresponding payroll record must be created for automated EMI deductions.
• When migrating historical or pre-existing loan data into HRStop for proper tracking and audit.
• When manager or multi-level approvals are required before disbursement and the administrator initiates or finalizes the record.

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Example use case

An employee, Priya Sharma (EMP045), applies for a loan of ₹75,000 to be repaid over 12 months with a reducing monthly interest rate.
The administrator records the loan request in the system, gets it approved by the manager, and then marks it Disbursed once finance confirms the release of funds.
This enables automatic EMI deductions from payroll starting the following month.

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Prerequisites

• Administrator access to the Payroll module.
• The Loan module is always available to administrators by default.
• To make the Loan option visible to employees, go to Control Panel → Settings → Payroll, scroll down to the Loan Settings section, and enable Enable Loan Module Visibility for Employees.
• (Optional) To include manager-level approvals, enable Allow Managers to Approve Loan Request.
  This allows managers to review or approve employee loan requests before final administrator disbursement.

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Note: Enabling the Enable Loan Module Visibility for Employees setting only affects employee access. Administrators always have access to the Loan module by default.

Step-by-step guide

1. Log in as an Administrator with permission to manage the Payroll module.
2. Navigate to: Control Panel → Payroll → Loans → +Create Loan.
3. Select Employee: Choose the active employee from the dropdown list.
4. Loan Amount: Enter the total loan amount. Avoid using commas or symbols.
5. Loan Date: Enter the date when the employee requested the loan. This date acts as the loan initiation date and is used in payroll history.
6. Document (Optional): Upload any supporting document that confirms the employee requested the loan. This may include a scanned application form, signed request, or formal approval letter.
7. Duration (Monthly): Specify the number of months over which the employee will repay the loan.
   1. If the repayment schedule is flexible, check Flexible / Not Fixed.
   2. In that case, you can specify a fixed EMI deduction amount instead of a fixed duration.
8. Interest Rate: Enter the interest rate and select its frequency (Monthly or Annually) and type (Flat or Reducing).
   • Flat: Interest is calculated on the total loan amount throughout the term.
     Example: For a ₹12,00,000 loan at 3% interest, the interest is applied on ₹12,00,000 each month.
   • Reducing: Interest is calculated on the remaining balance after each EMI repayment.
     Example: For a ₹12,00,000 loan, once ₹1,00,000 is repaid, interest is calculated on ₹11,00,000 for the next period.
9. Status: Select the current loan status:
   • Pending: The loan has been created by the employee or administrator but is awaiting approval.
   • Approved: The loan has been approved by all required approvers (e.g., manager and administrator) and is ready for finance disbursement.
   • Disbursed: The loan amount has been released to the employee. At this stage, EMI deductions begin.
10. (Visible only when Status = Disbursed): Once the loan is marked Disbursed, the following fields become available:
    • Payment Mode: Method used to release the funds (e.g., Bank Transfer, Cheque, Cash).
    • Payment Details: Reference details such as transaction ID, cheque number, or transfer reference.
    • EMI Start Month: Month from which the EMI deductions will start in payroll.
11. Notes: Add internal remarks or contextual comments (for example, reference to the employee’s approval email or repayment conditions).
12. Loan Perquisite: Add Interest Benefit as Loan Perquisite. When an employee takes a loan from a bank, interest is charged as per standard bank rates. However, if the same loan is taken from the employer and either no interest or a lower rate of interest is charged, the difference in interest (i.e., the benefit enjoyed by the employee) is treated as a Loan Perquisite. If you select this option, this interest benefit is considered as a taxable earning under the Income Tax computation of the employee.
13. Click Create: Click Create to save the loan record. Use Reset to clear all fields before saving if needed.

Status lifecycle

Status	Description	Typical action owner
Pending	Loan created but awaiting approvals. Can be created by employee or administrator.	Manager / Admin approval pending
Approved	All required approvals completed. Loan ready for disbursement.	Admin / Finance
Disbursed	Loan amount released to the employee; EMI deductions will begin as per the defined start month.	Finance / Payroll
Repaid	All EMI transactions recorded and total repayment equals loan amount; system marks as repaid automatically.	System-generated after all EMIs recorded

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What you can do once the loan is added

Once a loan is added, you can perform the following actions:

• Approve or Reject a Loan Request – Review and finalize loan requests pending manager or admin approval.
  (See: Loan Approval Workflow)
• Mark a Loan as Disbursed – Update the loan record once the finance team confirms payment to the employee.
  (See: Marking a Loan as Disbursed)
• Add or Record EMI Transactions – Enter manual or bulk EMI repayments and track the remaining balance.
  (See: Recording Loan Repayments (EMI Transactions))
• View Loan Transaction Details – Access repayment history, audit trail, and outstanding balances.
  (See: Loan Transaction Details)
• Attach or Update Documents – Upload any supporting documents related to the loan request or disbursement.
• Monitor Loan Status and Repayment Progress – Review the right-side panel for calculated EMIs, total interest, and balance.

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Employee access to loan details

Once a loan entry is created, employees can view their loan information directly from the Main Panel → Payroll → Loan section in the self-service portal.
They can see loan details such as:

• Loan amount, duration, and interest rate
• Status (Pending, Approved, Disbursed, Repaid)
• EMI details, including upcoming and paid installments
• Any documents attached by the administrator

As the payroll is processed and EMIs are deducted, the updated repayment records automatically appear in the same section.
This ensures complete visibility for employees and reduces manual follow-up requests.

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Pro tips

Always set the EMI Start Month after confirming the actual disbursement month to align deductions with payroll processing.

• Use Document to upload a copy of the employee’s request or any internal approval proof.
• Use Notes to reference where the original approval or payment proof is stored.
• For flexible repayment cases, specify a fixed EMI amount and note the arrangement for tracking purposes.
• Regularly review “All Loans” to ensure repayment statuses are accurate and that all disbursed loans have EMI start months defined.