> ## Documentation Index > Fetch the complete documentation index at: https://docs.hitaji360.com/llms.txt > Use this file to discover all available pages before exploring further. # Employee loans & advances > Many employers lend staff money — a salary advance, a school-fees loan, an emergency loan — and recover it from future pay. Many employers lend staff money — a salary advance, a school-fees loan, an emergency loan — and recover it from future pay. Hitaji 360's employee-loans feature manages the whole arrangement: you define the **loan products** (types) you offer, an employee **applies**, the loan is **approved** and **disbursed** (which pays the money out and posts it to your books), and then each payroll run **automatically recovers** an instalment from the employee's net pay until the balance is cleared. Every step that moves money posts a proper double-entry journal, so a loan is never just a spreadsheet note — it lives in your general ledger as a receivable that draws down as the employee repays. **You'll find this at:** `/payroll/loans` (the loan list). Open a loan at `/payroll/loans/:id`. Define loan products at `/payroll/setup/loan-types` (which opens **Settings → ERP → Finance → Loan types**). > 📷 *Screenshot: the employee loans list with status tabs and the "Apply for Loan" button — to be added.* > **Multi-business:** loan types and loans belong to one business and post to its accounting book. Confirm the business switcher first. *** ## Loan types (the products you offer) A **loan type** is a reusable template that fixes the terms and the accounting for a kind of loan. Create and edit these under **Settings → ERP → Finance → Loan types** (the old `/payroll/setup/loan-types` link redirects there). | Field | Notes | | ---------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | | **Name** | The product name (unique per business), e.g. "Staff emergency loan". | | **Description** | Optional. | | **Maximum loan amount** | The cap on any single loan under this type. | | **Maximum repayment months** | The longest term allowed. | | **Interest rate** | Annual percentage (e.g. 12 = 12% p.a.). Set to 0 for an interest-free advance. | | **Interest method** | **Flat** (interest fixed on the original principal each month) or **Reducing balance** (standard EMI on the declining balance — interest falls as you repay). | | **Requires approval** | If off, an application is auto-approved at apply time; if on, a separate approval step is required. | | **Salary component** | The deduction component payroll uses to recover instalments. | | **Disbursement account** | The cash/bank account the money is paid out from (credited on disburse). | | **Receivable account** | The loan-receivable asset account (debited on disburse, credited as the employee repays). | | **Interest income account** | Where the interest portion of each repayment is booked. | A loan type can be **disabled** so it can no longer be used for new applications without deleting its history. *** ## The loan lifecycle (statuses) | Status | Meaning | What you can do | | ------------- | ------------------------------------------------------------- | -------------------------------------------------------------------- | | **Applied** | Application submitted; schedule generated | Approve, cancel (auto-approves if the type doesn't require approval) | | **Approved** | Cleared for payout; nothing disbursed yet | Disburse, cancel | | **Disbursed** | Money paid out — **the disbursement is posted to the ledger** | Start repayment, (payroll will begin recovering) | | **Repaying** | One or more payroll instalments recovered | Recover more (automatic), close when cleared | | **Closed** | Fully repaid (balance ≈ 0) | View only | | **Cancelled** | Abandoned before disbursement | Nothing further | A loan can only be **cancelled** while it is Applied or Approved — once money is disbursed it must be repaid (or unwound by reversing the payroll runs that recovered it). *** ## Applying for a loan From the loans list choose **Apply for Loan**. You pick the employee, the loan type, the amount, the term in months, and (optionally) a repayment start date. The form shows a live **amortisation preview** — the monthly instalment, the total interest, and the total repayable — so everyone sees the cost up front. **Validation:** the amount must be above zero and within the type's maximum; the term must be at least one month and within the type's maximum; the type must be enabled. The repayment schedule is generated at apply time (the final instalment absorbs any rounding so the principal sums exactly). If the loan type has **Requires approval** turned off, the loan jumps straight to **Approved**. *** ## Approving and disbursing | Action | What it does | Permission | | ------------------- | -------------------------------------------------------------------------------------------------------- | ----------------- | | **Approve** | Moves an Applied loan to Approved | `payroll:approve` | | **Disburse** | Pays the money out and **posts the disbursement to the ledger**; moves Approved → Disbursed | `payroll:write` | | **Start repayment** | Marks the loan Repaying so payroll begins recovering (also happens automatically on the first deduction) | `payroll:write` | | **Close** | Closes a fully-repaid loan | `payroll:write` | | **Cancel** | Cancels an Applied/Approved loan | `payroll:write` | > **Separation of duties.** Approval needs the distinct `payroll:approve` permission, and the system additionally blocks the person who *created* the application from approving their own loan — the applicant can never be the approver. Disbursement runs under a lock so the same loan can't be paid out twice by two concurrent clicks. You can re-anchor the repayment start date at disbursement; the schedule's due dates recalculate from it. *** ## Repayment through payroll Once a loan is **Disbursed** or **Repaying**, payroll does the recovery for you. When a run is generated, each due instalment for the employee is folded into the slip as a loan-repayment deduction, and when the run is processed the recovery is applied inside the run's transaction: * the loan's **amount repaid** and **outstanding balance** update, * each schedule instalment walks Pending → Partial → Paid, * principal recovered is **capped at the outstanding balance** (a run never over-recovers), and * when the balance reaches zero the loan auto-closes. Each recovery is recorded once per (loan, run), so a run can't double-recover the same loan. If a payroll run is **cancelled**, its loan recoveries are **reversed** — the outstanding balance and schedule are restored and the GL entry is backed out. On the **loan detail page** (`/payroll/loans/:id`) you can see the full repayment schedule, the running balance, and the per-run deduction history. *** ## Permissions | Action | Permission | | ------------------------------------------------------------------ | ----------------- | | View loans and loan types, schedules, history | `payroll:read` | | Create loan types, apply, disburse, start repayment, close, cancel | `payroll:write` | | Approve a loan application | `payroll:approve` | (The equivalent `employee-loans:read/write/approve` slugs also satisfy these gates.) *** ## Behind the scenes — the accounting ### On disbursement Paying the loan out recognises a receivable (the employee now owes you) and reduces cash: | | Debit | Credit | | --------------------------------------------------------------------------- | ----------- | ----------- | | **Loan receivable** (the type's receivable account, tagged to the employee) | Loan amount | | | **Cash / bank** (the type's disbursement account) | | Loan amount | The receivable leg is stamped with the employee's contact so the loan shows on their sub-ledger. ### On repayment (through payroll) Each payroll recovery clears part of what the employee would otherwise take home and draws the receivable down, booking any interest as income: | | Debit | Credit | | -------------------------------------------------------- | -------------- | ------------------------- | | **Net pay payable / salary payable** | Total deducted | | | **Loan receivable** (tagged to the employee) | | Principal recovered | | **Interest income** (the type's interest-income account) | | Interest portion (if any) | So the employee's net pay is redirected to settle the loan: the principal portion clears the receivable and the interest portion is recognised as income. Reversing a payroll run reverses these entries. *** ## Related * [Running payroll](/hr/user/payroll/running-payroll) — runs recover loan instalments and post the entries * [Salary components](/hr/user/payroll/salary-components) — the deduction component a loan type uses * [Payslips](/hr/user/payroll/payslips) — where the employee sees the loan deduction * [Bank loans](/accounting/user/transactions/bank-loans) — loans your *business* takes (a different feature) * [Payroll overview](/hr/user/payroll/overview) — the whole chain