In banking terms, a salary advance is a kind of short-term loan that our bank is willing to grant us because we have our salary paid directly into our account with them and hold what's known as a salary account. They will typically ask us to pay it back within six months, although some banks allow up to one year. Normally, the amount of this loan cannot be more than what we earn. While some banks may be willing to grant us double or even triple this amount, you can be sure that terms and conditions will apply and it will always subject to our financial profile. This type of advance is a great solution for any unexpected events or emergencies that may arise: expenses that catch you by surprise, urgent repairs, bills we can't keep up with... What's more, this advance is becoming increasingly popular; in fact, most banks view this option as an additional benefit and a lure to attract new customers.
Benefits of getting an advance payment of your salary
While these loans are not a particularly common means of financing, they do come with very low interest rates (many are at 0% NIR), despite being subject to arrangement and application fees; plus other benefits, such as the liquidity cushion they provide at those crunch times in life. And with no waiting or paperwork: the loan is granted almost straight away as the bank already knows our profile and will only need to run a quick credit check.
Salary advance apps
Fintechs have now come up with a new way for us to get an advance on the amount of our salary we have earned up until the time of the loan. It is essentially a mini-credit that will let us get paid whenever we want, without having to wait until the end of the month.
These apps act as intermediaries between our company and us, as advance payment managers. However, for this kind of arrangement to work, our company will also need to be registered with the service.
In fact, it's not so much a loan, more a transfer: the app will charge no interest and will charge a fee of around 15% of the money advanced.
The other type of advance
Aside from asking the bank, it is important to know that as employees, we can request an advance on our salary from the company where we work. As it happens, all workers are entitled to receive“ any advance they want on the work they have already performed, before reaching the end of the month, or their agreed salary payment date”. (Workers Statute, art. 29).
This right refers only to the last period worked and not yet paid, and may never exceed 90% of the salary earned at the time the advance is requested. In addition, this advance will be deducted from the following month's salary, and will in any case be treated as an exception (i.e. it cannot be requested as a matter of course). If we are going to request one, we will always need to do what the law has to say.