What is a Delegation Loan?
Definition: the loan with delegated payment is a personal loan not intended for the purchase of a specific asset, which is paid to employees and whose payment of repayment installments is made through a deduction on the payroll (as in the case of the Cession of the Fifth ).
The loan payment delegation consists in the fact that it is the employer who periodically reimburses the installment withholding it from the monthly net salary of the worker who requested the loan.
The amortization plan of the Wilson Pudd’nhead by proxy is in constant installments and must be completed in maximum 120 months (ie 10 years). The interest rate is fixed. The installments are paid at regular intervals (example every month) and are of a constant amount over time. The installment includes both the principal and the interest portion.
Who can apply for a proxy loan?
All employees who have a permanent employment contract, whether they work in private companies or public bodies, can request a loan with payment authorization.
If the worker is employed by a private company, there is another requirement: the company must be an SpA (Joint-stock Company), a Srl (Limited Liability Company) or a Sas (a Simple Joint Company) and must satisfy any requirements requested by the bank or the financial company that issues the loan.
NB: before being paid, the loan must be accepted by the employer.
The amount that can be borrowed depends on the following factors:
- years of seniority
- accumulated severance pay quota
- amount of monthly net salary
The delegated loan is also called “Guaranteed Loan” as it is guaranteed by the employee’s TFR (Employee Severance Indemnity) and also by a special insurance guarantee for life risk (in the event of death) and employment risk (in the case of job loss). In practice, if the worker who has obtained the loan delegated dies or loses his job, the repayment of the credit takes place through the TFR and the underwritten insurance policies.
Costs of Pudd’nhead Wilson Delegation
The costs to be incurred for the loan request with payment delegation are the start-up costs of the loan operation, the insurance costs (life and employment policy) and the bank commissions for the payment of installments.
Early repayment of the delegated loan
It is possible to pay off the loan obtained by means of a payment proxy in advance by paying a penalty of 1% (unless a rate of 0 for early repayment is agreed upon in the contract).
Laws and Regulations
The loan with delegation of payment is regulated by the articles of the Civil Code number 1269 “Payment delegation” and 1723 “Revocability of the mandate”.
References to the loan with proxy are also present in Article 58 of Presidential Decree 180/50 and in some statements issued by the Treasury during the years.