Octal HR's Loans & Advances module records each loan against a loan type label, a repayment mode, and an interest setting. Loan disbursements and EMI recoveries integrate directly with payroll so deductions happen automatically each month.
Overview
The loan type is a simple label that categorises each loan. It is chosen on the loan form when a loan is created — there is no separate "loan type" configuration screen and no per-type rule set. The available labels are: personal, vehicle, housing, education, medical, emergency, and other.
Loans are created under Loans & Advances → All Loans → + New Loan (or by employees from the self-service portal). The loan type, amount, repayment mode, and interest settings are all entered directly on the loan form.
Loan Type Labels
The loan type is a label only — it does not, by itself, change limits, tenure, or eligibility. Repayment mode, interest, and amount are set per loan. The available labels are:
Housing
For property purchase, construction, or major renovation.
Vehicle
For purchase of a car or motorcycle.
Education
For the employee's or their children's education fees.
Medical
For hospitalisation, surgery, or major medical expenses for the employee or immediate family.
Personal
General-purpose loan for personal financial needs.
Emergency / Other
Urgent needs, or any loan that does not fit the labels above.
Repayment Modes
Each loan is set to one of three repayment modes:
EMI (Equal Monthly Instalments)
A fixed amount is deducted from the employee's net salary each month until the loan is fully recovered. The EMI is calculated as Principal ÷ Tenure (months), with interest added if applicable. This is the most common method for large loans.
Bullet Repayment
The full loan amount (plus any interest) is recovered in a single deduction on the bullet date. Used for short-term and small loans.
Manual
No payroll deduction is registered. HR records repayments manually against the loan as they are received.
Interest
Interest is set per loan, not per type. Each loan has an interest type and an annual interest rate:
- None (interest-free): No interest is charged. Most employee loans in Pakistan use this.
- Flat: Interest is charged on the original principal for the loan tenure and spread evenly across the instalments.
- Reducing balance: Interest is charged on the outstanding balance each month, so the interest portion falls as the loan is repaid.
Where interest applies, it is built into the instalment amount when the repayment schedule is generated, and the payslip shows a single loan deduction line.
Interest type (none / flat / reducing) and the annual rate are entered on the loan form, alongside the amount, tenure, and repayment mode.
Creating a Loan
Deduction Limit
When a loan amount is entered, the system runs a repayment-capacity check against the employee's net salary:
| Rule | Behaviour |
|---|---|
| Maximum deduction as % of net salary | The employee's combined loan EMI deductions are capped at a configurable percentage of net salary (default 50%). If a new loan would push total deductions over the cap, the application is flagged as exceeding the limit. |