Set up a loan policy

What this achieves

A loan policy sets the lending limits for one loan type, either company-wide or for a single legal entity. Without a policy there are no limits at all, so any amount is allowed.

Required role: Administrator.

Before you start

Know which loan type the policy governs and whether it applies to your whole company or to one entity. Approval routing is not set here — that is configured in workflows.

Steps

Go to Payroll → Loan Policies.
Select New policy.
Enter a Policy name.

Example: United Kingdom — staff product financing.
Choose the loan type the policy governs.
Set the Scope — leave the entity empty for the company-wide default, or choose an entity for an override.
Set Effective from.
Under Limits, set the caps you want. Leave a field empty for no limit on that rule.
Enter a Source.

Example: HR handbook §4.2.
Select Save policy.

Loan types

Option	Description
Cash	A cash advance repaid from payroll.
Product	An item financed for the employee and repaid from payroll.

A policy governs one type, so a company lending both needs one policy for each.

The limits

Option	Description
Maximum amount	The largest principal a loan of this type may carry.
Maximum × monthly salary	A cap expressed as a multiple of the employee’s monthly base pay, normalized from their pay frequency.
Cooldown (months)	Months after the previous loan of this type settled before another may start.
Max concurrent loans	How many loans of this type may be outstanding at once.
Maximum interest rate (%)	The highest flat rate a loan of this type may carry. Enter 0 to forbid interest entirely.
Maximum flat fee (%)	The highest one-off fee a flat-rate loan may charge on the principal. Enter 0 to forbid it.
Maximum annual rate (%)	The highest annual rate a reducing-balance loan may carry, charged each period on what is still owed.

Example: HC Corp UK Ltd caps a cash loan for Tom Hargreaves at three times his monthly base pay, with one loan outstanding at a time and a cooldown before he can take another.

The flat fee and the annual rate are different numbers governing different products. A one-off fee on a flat-rate loan is not the same thing as a rate charged every period on a declining balance, so do not copy one into the other.

Scope and precedence

Leave the entity empty for the company-wide default. A policy naming a specific entity replaces the default for that entity entirely — it does not add to it.

Where your organization operates in more than one currency, amount caps are best set on entity-level policies, because a bare number carries no currency.

Capping interest at the original projection

Cap interest at the original projection limits the total interest a reducing-balance loan can charge over its life to what it projected when it was written. It exists so a shortfall payroll caused cannot make a loan cost the borrower more than they were shown. It is off by default.

What happens next

The policy governs loans created on or after its effective date, so a future date lets you stage a change without affecting loans already running. Retiring a policy makes new loans fall back to the company-wide default, or to no limits if there is not one. Loans themselves are then created and repaid through payroll, with installments deducted each run.