Repayment period for salary-based loans extended to 7 years

The Bangko Sentral ng Pilipinas (BSP) has extended the maximum repayment period of salary-based personal loans to up to seven years, giving borrowers more time to pay, and reducing the monthly deductions from their salaries.

According to the central bank, the new maximum repayment period — up from three years, or five years in select cases — will apply to all borrowers, including teachers and other employees.

It covers salary-based general-purpose consumption loans (SBGPCLs) or unsecured loans used for immediate to short-term needs such as education, healthcare, emergencies, travel, household needs, and other personal expenses.

“A longer repayment period makes payments more manageable. At the same time, the seven-year limit serves as a safeguard against excessive borrowing,” the BSP said in an emailed statement.

The BSP clarified that the seven-year period is a maximum allowable tenor, and not a fixed term, and local banks should still determine the actual terms based on the borrower’s capacity including sources of repayment, employment, and credit history.

For financing longer-term or non-consumption needs, the BSP said borrowers may consider other types of borrowing programs including housing, motor vehicle, or credit card loans that are outside of SBGPCLs, and not covered by the seven-year maximum limit.

“The BSP continues to work with the Department of Education and partner financial institutions to promote financial literacy and responsible borrowing,” the BSP said.

“Part of this effort is ensuring borrowers retain enough take-home pay after loan repayments,” it added. — BAP, GMA News