Personal Loan
July 1, 2016 5:10 PM   Subscribe

Making a personal loan to a potential direct report so they can return to fill an open position. What do you think?

Do you think this is a good or bad idea?

Manager loses assistant and can bring back a quality prior assistant. Here are the facts:

- PA (Prior Assistant) left to go to another company in order to take out a loan against 401k (Original Company did not allow loans against 401k)
- Loan was used for work on house
- PA was in adverse personal financial situation due to debt from ex-husband in divorce
- PA has since sold house but still holds mortgage so does not have equity to pay back the 401k loan

Manager is considering loaning PA the money to pay back the 401k loan so she can come back to Original Company and be the assistant. More notes:
- Manager needs a good PA and this one would be good and not need to be trained
- PA has much integrity; much of this information did not come directly from PA but from others who know more about the situation
- Manager feels that this would be a good deed helping a good person

Manager can afford to loan this money from savings. The money is equivalent to about 4 months of household expenses.
posted by RoadScholar to Work & Money (15 answers total) 1 user marked this as a favorite
If he can afford (both financially and psychologically) to not get the money back - if he feels confident it will not affect their working relationship if he doesn't get back even a dime - and he has extensive experience working with this assistant and is very confident they were in a bad spot that won't be repeated and that they're worth the trouble - then yes. But that seems like a lot of ifs.
posted by something something at 5:18 PM on July 1, 2016 [10 favorites]

Why does the PA need the money to come back? If she quits her current job, does she have to immediately pay back the loan?
posted by The corpse in the library at 5:19 PM on July 1, 2016 [2 favorites]

What happens if they never pay the manager back? Are they fired? When? Yes, this is a terrible idea.
posted by almostmanda at 5:23 PM on July 1, 2016 [11 favorites]

As a manager, I would never, in a million years, put one of my employees in a position of owing me money. (For the same reason, I would never gamble with an employee.) It creates a power dynamic that is incredibly stressful, and potentially unhealthy.
posted by NotMyselfRightNow at 5:29 PM on July 1, 2016 [33 favorites]

A 401k loan is repayable on leaving employer OR it gets treated as a disbursement and so tax and penalty is due to IRS. The personal loan sounds like a bad idea, but any chance the new employer could pay the tax and penalty as a 'hiring bonus'? Then PA will be no worse off for moving company.
posted by Xhris at 5:31 PM on July 1, 2016 [8 favorites]

- PA has since sold house but still holds mortgage so does not have equity to pay back the 401k loan

Per the description in this post, if the PA has knowledge and is of great value, why not: Give the PA the same job but at a higher salary? Then the PA can pay the loan back more quickly, everyone wins.
posted by Wolfster at 5:32 PM on July 1, 2016 [7 favorites]

Manager should get Company to work something out with PA-- a re-signing bonus, prepayment of salary. Or Manager should get Company to work something out directly with PA's Current Employer-- direct payment in smaller installments, immediately paying a %.

I think it's a terrible idea for Manager to make a personal loan. Way too awkward, weird balance of power, TERRIBLY intimate. Unfair to other employees. Possible legal or HR objections.

What if...
-Manager gets sick, house burns down, loses job, has sick family member, needs new car, and needs more money than they thought?
-PA does not pay back?
-The personal or professional relationship sours?
-Other employees catch wind and complain up the chain?

Good assistants are hard to find but not that hard.
posted by kapers at 5:34 PM on July 1, 2016 [13 favorites]

Yeah, don't mix business money and personal money. This needs to be handled through the company. The right way for Manager to help PA out would be to pull strings at the company in order to sweeten the deal enough that PA can afford to come back. Making a personal loan would be so many kinds of weird. If I were PA, even the offer of this would make me super uncomfortable. I would never, ever want to owe my boss money, and if my boss offered to make me a loan out of her own pocket I'd feel like she was transgressing a major boundary.
posted by Anticipation Of A New Lover's Arrival, The at 5:41 PM on July 1, 2016 [6 favorites]

Can the PA take out a loan from the new company against their paycheck and be paid back via deductions from future paychecks? My employer has done this for me when I've needed it. I work for a really small company, so this may not be workable in a different setting or for a brand new employee.
posted by MuChao at 8:40 PM on July 1, 2016 [1 favorite]

Is it instead possible to work out a company provided signing bonus (repayable if the assistant leaves within 18 months, or similar), as a way to resolve the issue?

If I were in your shoes I wouldn't even think of the personal loan. It's too likely to create a problematic dynamic, and eventually end poorly.
posted by whisk(e)y neat at 9:30 PM on July 1, 2016 [2 favorites]

The only way this would work is if they were both able to keep it between them and for it to be a gift about which they never spoke again.
Like MiB flashy thing never spoke about it.

Either the company works something out at the manager's behest or it will be like the Loan of Damocles over the PA.
posted by fullerine at 3:25 AM on July 2, 2016 [2 favorites]

Bad idea. Manager should talk to Company about something like an advance on salary, rather than use personal money for this.
posted by rpfields at 4:46 AM on July 2, 2016 [2 favorites]

Curious because this smells to me, and hopefully this isn't a derail: How can PA hold a mortgage on a house she no longer owns? Doesn't that mean the new owners don't have a clean title?

Regardless: I think a personal loan would be a very bad idea.
posted by Sweetie Darling at 5:21 AM on July 2, 2016 [3 favorites]

Sounds like a supremely bad idea.
posted by fixedgear at 6:06 AM on July 2, 2016 [1 favorite]

Response by poster: Sweetie Darlingm good question - the PA is doing a private seller-held mortgage with the buyer so there is no bank involved. The PA is the bank. Apparently this was the only way to get a sale. There must be something about the house. I don't know the details. So, yes, the new owners / buyers do not hold the title the same as in a bank mortgage where the bank holds the title until the mortgage is paid off.
posted by RoadScholar at 6:35 AM on July 2, 2016

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