Term limit lift for salary loans eyed
The Bangko Sentral ng Pilipinas (BSP) is exploring the removal of term limits on salary-based loans, a move aimed at easing the debt burden for many consumers, including teachers.
Under the proposed approach, banks would be allowed to tailor repayment schedules to borrowers’ financial capacity rather than adhere to fixed limits. Current BSP guidelines set the standard repayment term for salary loans at three years, extendable to five years in special cases.
“The BSP is considering possible amendments to the regulations governing Salary‑Based General‑Purpose Consumption Loans, particularly the lifting of the existing tenor limit,” the central bank said.
“The proposed approach is intended to provide greater repayment flexibility to borrowers, including teachers, by allowing banks to set longer and more appropriate repayment periods that better align with borrowers’ cash‑flow capacity and help ease monthly debt servicing,” it added.
The review comes amid mounting calls from teachers to extend repayment periods for salary loans to up to 10 years to ease their debt burden. The Department of Education (DepEd) has an Automatic Payroll Deduction System, or APDS, that regulates salary deductions for teachers and staff, mainly to repay loans from accredited lending companies.
In a Jan. 30 letter to BSP Governor Eli Remolona Jr., Education Secretary Sonny Angara sought guidance on whether there may be room to study, review or pilot more flexible loan structures for salary-based borrowers like teachers and education workers.
Angara also asked the BSP to explore alternative mechanisms that would allow longer repayment periods without undermining its mandate to promote financial stability. The DepEd stands ready to provide data and policy inputs to the central bank, he said, noting that the financial well-being of teachers “is closely linked to their capacity to deliver quality education.”
Meanwhile, the Alliance of Concerned Teachers has said the DepEd should also push to raise the entry-level pay of teachers to P50,000. The group said raising salaries is a longer-term solution to the financial difficulties of education workers.
