Does anyone have any experience taking out personal loans? I may end up in a situation where I need to buy my way out of my current employment contract. I am looking to move on from my current company but I took a draw up front which amounts to being paid extra money every pay check for the first year as a ramp up period until sales commission is built up and starts to roll in. I do not have to pay it back if I stay for four years, but I’m not going to get there and am ready to move on. So, I’m looking at taking a personal loan out, pay what might be my old employer back right away so I don’t have to deal with them any more. Spare me how it’s a bad financial decision (I’m aware) but I’m not going to be tied to my old company for an extended period of time. I anticipate being able to pay the loan back within a year or so and it’s not all too much money (less than $10K), but I’d rather stay liquid than burn through rainy day savings. Questions.. What’s the best place to take the loan out from? Do banks typically offer them? I’d much prefer a brick and mortar place I can go and sit down to talk to a loan officer rather than do this digitally or over the phone Do you have to give them a reason? Are you able to pay it back quicker than the term period? Any feedback would be greatly appreciated.
If you own a home, and have some equity, the rates on HELOCs are generally a bit less than a personal loan. Of course you'll have closing costs but there are some lenders that advertise "no closing costs", I'm sure they make it up in some other fees or higher rates but worth a look for comparison. Your own bank is always a good bet though since they have seen your banking history up close. I think SOFI and BofA both offer a no closing cost option. Another option, if you have enough equity in a vehicle you can refi your auto loan. To give an idea, my bank is about 6% on auto loans, about the same on HELOC, but personal loan or line of credit jumps up to 11%
Check with your local credit unions. They’ll often make small unsecured loans to members. Family is good in a pinch too, but obviously that raises some other issues. Interestingly, where I am if an employee is negative on a draw against commission when he separates from employment, the employer cannot claw it back. You might want to check out the laws where you are
I’d have to check it out but the way my contract reads, it’s pretty clear. Is the contract legal? Not sure. I don’t have any family members with money laying around unfortunately. I bank with Chase who unfortunately doesn’t do personal loans to my knowledge. Not a home owner yet unfortunately and I own my car outright with nothing owed on it. I don’t think Chase does personal loans or else I’d check with them. I might roll down to TD bank to see what they can do since there’s a branch in town. Thanks for the feedback guys.
you could dip into your 401k. they advise against that but my thoughts are for something big like a career move you are just betting on yourself to build it back. and also we could get hit by that meteor in 2032 anyway
The other thing I’ve done in the past is pay it off with a credit card and then roll the balance over into a new account with a 16 month zero interest teaser rate. You’ll pay a few hundred bucks in fees but you will be sure as shit to pay it all off before the promotional rate expires. Whatever you do, don’t stay with an employer you want to move on from. Whatever it costs it’ll be worth it.
I thought about it. I’ve done it before but I was trying to stay away from getting slammed with their tax. Yeah I anticipate being able to pay the loan back within a year and a half at most hopefully. I’ve only been at my new company for less than six months but they clearly don’t know how to scale up and my boss is a dickhead. I got some bad info from people I know in the business to come here. The problem with my business is that the sales commission cycle is long. Once you sell something the project might not be complete for 8 months and you’re not paid until completion and final billing.
JV It is not going to work out in your situation but as a general rule, your best bet is to take a 401K loan where the interest you pay goes directly into your own 401K account as a gain. So you are paying interest to yourself. But if you are planning on leaving your current employer try not take any loan from your existing employers 401K plan as the plan will force you to either pay it off or take it as a 401K payment where you will be forced to pay a penalty on top of tax. Some good advice already given. But 10K is a small enough amount you can borrow from your credit card company. I always receive mails from Amex and some banks for taking a loan through my credit card account. I always either did 401K loans or home equity loans and never entertained borrowing though credit card companies but you can explore that too.
Not sure what you're driving but Is "downsizing" your vehicle an option? Granted it requires eating a slice of humble pie for awhile but if it's an option...
Nah I have a Cadillac with 105K miles on it. Nothing to really downgrade too. I’m not in a financial bind, I’m just trying to figure out the most cost effective way to pay the draw back without getting railroaded by interest.
Seriously, see what ChatGPT or some other robot has to say about whether your employer can legally claw back draws in your state. May be worth looking into for real. I know the contract says it can, but it may not be enforceable and they'll know better than to run afoul of wage and labor laws, I'm assuming you don't live in some slapdick state like Kentucky or West Virginia.
I would definitely look into Dierking's suggestion to find out for sure if the contract is enforceable. If it is, my suggestion is those rainy day savings of yours? Be your own bank, and pay yourself back WITH INTEREST. It is a fantastic financial strategy if 1) doing so won't zero you out and 2) you actually have the discipline to tack on the interest to yourself religiously. Why pay some a-hole interest when you can pay yourself interest? Win/win. Good luck.
I did it for him. @Jonathan_Vilma - Here is what chatgpt says. I know you are in New Jersey. What the Legal Landscape in New Jersey Looks Like Commissions Are “Wages” Under NJ Law Under New Jersey’s Wage Payment Law, commissions (if “definitely determined” and due under the employment agreement) are considered “wages.” LegalClarity+2Rabner Baumgart Ben-Asher & Nirenberg+2 That means there are stronger protections around how and when they’re paid. Smith Eibeler+1 Overpayment / Recoupment Rules If your friend was “overpaid” (i.e., the draw is treated by the employer as an advance or overpayment), his employer may try to recover that money. But they must follow certain rules. LegalClarity Crucially, under NJ law, deductions from wages generally require written authorization from the employee. LegalClarity notes that wage deductions are tightly regulated. LegalClarity Also, the NJ Department of Labor requires that final wages (when employment ends) be paid within 10 days after the end of the pay period. NJ.gov+1 Agreements Between Employer & Employee Under N.J. Statutes (34:11-4.7), there are limits on what kind of “agreements” about wage payments are enforceable: “It shall be unlawful for any employer to enter into or make any agreement … otherwise than as provided in this act … Every agreement … made in violation of this section … shall be deemed to be null and void …” Justia Law That means if the draw-repayment or clawback agreement is not carefully drafted, it could be challenged. Negative Balances & Draws Many sales-commission structures use a “draw against commission”: the employer advances money, expecting that future commissions will “settle” (i.e., pay back) the draw. According to employment-law attorneys in NJ, these negative draw balances might be carried forward, or the employer may try to recoup, depending on the plan. Rabner Baumgart Ben-Asher & Nirenberg But, it's not a blanket “they always win”: whether they can force repayment depends heavily on how the plan defines “draw,” “settlement,” and what happens if employment ends early. Liquidated Damages If an employer fails to pay earned commissions, the employee might be able to claim not only the unpaid commissions but also liquidated damages, under NJ’s wage laws — up to two times the unpaid amount, according to some sources. Rabner Baumgart Ben-Asher & Nirenberg+1 So, it cuts both ways: the employer has risks, too, if they mis-handle commission pay. Key Factors That Will Determine Whether His Employer Can Collect Money From Him To assess how risky it is for your friend, these are the critical details to examine: What does his written agreement say? Is there a commission plan or employment contract that explicitly states he must pay back the draw if he leaves early? Does it define how “draw” is reconciled (e.g., quarterly, monthly)? Does it spell out what happens to “unsettled draw” when employment terminates? Did he sign a repayment authorization? Did he, at any point, agree in writing to have future paychecks or commissions docked to repay the draw? Was there a clause in his offer letter or contract about repayment? Is the draw structured as a “recoverable advance” or something else? If it’s a recoverable advance (i.e., “draw”), then yes, the company commonly expects to recover negative amounts via future commissions. But if the draw was more like a guaranteed minimum salary, then it may not be fully repayable. What’s the size of the “overpayment” / negative balance? If the negative balance is large, the company might push hard. If it’s smaller, they might be okay writing it off (or negotiate). Has the employer started deducting from his pay? If they are trying to deduct from current or final pay, they need employee’s written authorization (unless certain exceptions apply). If they didn’t get that, their ability to recoup may be limited. What Risks Does Your Friend Face? His employer could try to demand repayment (or set up a repayment plan) if the agreement allows it. If he refuses, they might sue him for the overpayment (if they think it's legally justified), though whether they’ll do that depends on cost, how clear the contract is, and how aggressive they are. If he agrees to deductions, he could end up with smaller paychecks (or even negative commission pay) until the “debt” is cleared. He might also be able to push back: if the repayment clause is vague, or not enforceable under NJ law, he might have leverage. What Should Your Friend Do (Next Steps) Get His Agreement in Writing Ask for a copy of his commission plan, employment contract, or any addendum that describes the draw and its repayment. Review it carefully (or have a lawyer review it) with an eye toward “draw repayment,” “overpayment,” “settlement,” and what happens upon resignation. Talk to HR / Payroll Ask them to explain how they plan to recoup the draw (if they plan to). Find out whether they intend to deduct from future pay or demand a lump-sum payment. Consider Consulting an Employment Attorney Given the stakes, it’s probably worth talking to a lawyer who specializes in employment law in New Jersey. Even a one-time consult might clarify whether his employer’s demands are legal and what his best response is. Prepare for a Negotiation He could negotiate a repayment plan. For example, maybe he can repay a portion monthly instead of a big check. If the clause is not strong or clear, he may have bargaining power. File a Wage Claim if Needed If his employer tries to withhold wages improperly, he may be able to file a complaint with the New Jersey Department of Labor. Since commissions are wages, failing to pay or making unlawful deductions could be a violation. Rabner Baumgart Ben-Asher & Nirenberg+2Castronovo & Mckinney, LLC+2 My Bottom Line (for Your Friend) Yes, there is a real risk that his employer will try to collect money from him when he leaves early — especially if his draw was “recoverable.” But it’s not guaranteed. Whether they can legally force all of it back depends heavily on how the agreement is written, whether he consented to deductions, and how the law applies to his specific plan. He has some potential defenses and negotiation leverage, especially in NJ, where there are strict rules about wage deductions and employer overpayments.
I looked too and it’s not worth the legal battle. I’ll sync money in fees into a loss to potentially owe it back anyways. It is also clearly defined in my contract. It’s ok though. Like I said, I don’t anticipate taking a loan out to pay interest for 60 months and pay the bank $5K. I intend to take out a long term and then pay it all back within a year to avoid paying all too much interest. That’s my other question though - do banks or loan providers allow loan repayment ahead of schedule without penalty? That’s another reason I hate the idea of not going and talking to someone in person about this.
In that case you have 2 options. For lowest interest, credit unions for a personal loan. Still expect to pay around 7% yearly. For 10K, you will pay $700 or so for interest. Other option is like Dierking says get a new credit card with 12 or 18 month 0% APR and do it that way. Don't forget you will pay around 3% for credit card balance transfers as well.
Most allow no penalty early payoff. Just make sure they aren’t somehow front loading interest. Not sure if possible to get 10k credit card. But some banks will give you 12-18 months interest free
