Although the payroll loan is guaranteed to be automatically deducted from the applicant’s salary, its cost is similar to that of personal loans, without there being an associated source of payment. Both within the banking sector, as there are other entities that offer financing at even higher prices.
Payroll loans, according to the Bank of Mexico (Banxico), are those that banking institutions grant to workers, and are periodically deducted from their payroll account. “The above characteristics, on the one hand, reduce the risk of non-payment and, on the other hand, mitigate the problem of asymmetric information on the profile of the borrower”.
Meanwhile, personal loans are defined as a type of loan granted by regulated financial institutions to any natural person who meets certain requirements, but since it is not a guaranteed loan, and since there is no associated payment source, the risk is usually one of the highest within the portfolio of banks.
Based on information from the National Banking and Securities Commission (CNBV), as of last January, the payroll loan portfolio exceeded 270,000 million pesos; while the personal ones were around 160,000 million.
The highest, the lowest
An exercise carried out in Banxico’s financial services comparator showed that in a payroll loan for 10,000 pesos to be paid within 12 months, the Total Annual Cost (CAT) – which includes interest plus commissions, insurance and others – more high, was recorded by the Credit 24×7 Payroll product from Santander with 45.8%; while when considering only the interest rate, it was 32.1 percent.
In this way, the monthly payment would be an average of 985 pesos to pay a total, at the end of the term, of 12,287 pesos. However, this bank has other financing of this type available with better conditions.
In contrast, the lowest in this category was BBVA Mexico’s Payroll Credit with Life Insurance product, with a CAT of 24.9% and an interest rate of 21.34%. Thus, the monthly payments would be 932 pesos for a total of 11,523 pesos.
Within the average, the so-called Inbursa EFE Payroll Credit was located, with a CAT of 32.4% and an interest rate of 28.0%, with which monthly payments of 965 pesos would be made and a total of 11,833.
Clarity
payroll
Payroll credits are those that banks grant to workers, and are deducted from their payroll account.
personal
Personal loans are a type of loan granted by regulated financial institutions to any natural person.
risks
The characteristics of payroll loans reduce the risk of non-payment and mitigate the problem of asymmetric information.