accepting a home loan from your boss — oh, and lying to him about it too

by Alison Green on December 2, 2009

A reader writes:

I initially discussed with my boss, who is also the sole owner of the company, the possibility of him giving me a home loan. The home loan was for me and my future spouse to buy a property to settle down. The amount is approximately 10% of the property price.

However, I have decided to purchase a property for investment of the same amount and defer my plan to buy a property for personal use.

Should I tell him the truth that I am using it for investment purpose? If yes, how do I convince him to lend me the down payment that I am going to use for my property investment?

I am speechless, so bear with me here.

What?!

This is a terrible, terrible plan.

First of all, your boss should not be loaning you money. It’s fraught with potential for huge problems — more on your boss’ side than yours, in fact. For instance, if you’re performing poorly down the road, will he be less inclined to fire you because he’s tied to you in this way, and he’ll lower his chances of getting paid back if you’re unemployed? Or, aside from that, will other employees think that’s happening? What happens if you’re late on payments or default altogether? Do you really think that won’t affect your relationship at work?

But that’s not even your question. Your question is whether you should lie to him to get the loan.

Um.

Have you thought about what will happen if your boss discovers this lie? (Which he very easily could. He sees your address on your payroll tax forms, for god’s sake.) And more to the point, how could you feel good about lying to the person who is very generously offering to make you a large loan?

And you also want to know how to convince him to loan you the money for a different use. I have no idea. I wouldn’t recommend trying.

I recommend a bank, not your boss.

Seriously, back away from this whole arrangement. It is a terrible, terrible idea.

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{ 15 comments }

{ 15 comments… read them below }

  2. Anonymous*

    My dad is the VP for a company that loans money to their employees all the time. He keeps trying to tell the president/owner that it's a really bad idea, but the owner keeps doing it. They've loaned out as much as $50K at a time to people… and I don't think they've ever had a loan fully paid back. They've even rehired people who left without paying off their loans.

    BAD, BAD, BAD for the company but a great deal for the borrowers. I sure hope that karma is real… jeeze. What a piece of work.

  3. Richard*

    Wow, what makes people think that this is a wonderful idea? This reminds me of the post a couple of weeks ago mentioning someone who rented a place to live with their boss, which surprise surprise, ended up rather badly for them.

    If you owe your boss money, you immediately risk complicating your professional relationship with them, as you have entered a legal contract with them outside of the work environment, beyond that of the employer/employee contract, which may not be under the same protections as contracts signed with the company. Even if you were able to take a loan out with the company, I would still be wary of anything that's capable of affecting you beyond a few months (i.e. any amount of money beyond small cash advances, which I have previously taken advantage of when moving for a job), as you have no idea how your employer will react if you can't make payments (and considering that they have access to how much you get paid every month, they can easily call you out if you say that you can't afford it, or as was previously mentioned, treat you differently in the workplace as a result.

  5. Anonymous*

    Very, very unprofessional on both accounts. I can't see anything good coming from this–only huge potential for disaster. Don't do it! Tell your boss, thanks very much for the offer but you've changed your mind.

  6. CK*

    Generally, I go to work for a paycheck and to a bank for loans. I'm not sure why a place of employment (or a boss) even entertains the idea of acting as bank for their employees. This is a bad, bad idea all around.

  7. Anonymous*

    I hope the boss reads this blog and learns what kind of person they are dealing with here. Wow.

  9. Jonathan*

    Yup – wretched idea (both the loan and the deceit).

    I worked at a place where the boss loaned an employee money (so they could go on a trip to Cuba together!). The employee was pretty bad at her job, but the rest of us assumed that our boss had too much invested in her to fire her.

    Well… I guess if you plan to be bad at your job, this is a good idea. It's the ultimate employment insurance.

  10. Richard*

    A trip to Cuba together? They might have kept that employee on for reasons other than owing money :P

    And even if that's not true, it certainly doesn't give the right impression!

  11. Anonymous*

    Thanks genuinely for the advice guys. Btw, I've told to him the truth and he seemed reluctant with the idea. So I guess I'll just leave the idea…

    Anyways from the boss's perspective it's still a good way to get the employee to be attached/obligated to the company in some way.

  12. CK*

    It's good you told him the truth. But I still don't understand how he could think it's a good idea. Typical things that get employees to stay at company are raises, benefits, room for promotion, good corporate culture and maybe a few other perks (like flexible schedule, work from home, free coffee, etc, etc). Handing out loans to employees to get them to stay just seems really unconventional (and not in a good way).

  13. Jonathan*

    Richard, there was no hanky panky – they were both straight women who would sometimes go on the prowl together – a whole other weird dynamic for the office!

    But the subordinate would always refer to our boss as her "best friend" when on the phone. Funnily, I don't think our boss shared the sentiment.

  15. Topic Originator*

    Fast forward to 2012, I’m still in the same company. Got the actual loan for property I’m staying in and doing a monthly repayment thing at 0% interest. Its been almost 2 years now.

    Any comments welcome.

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