Pag-IBIG Salary Loan Vs SSS Salary Loan: Which One Is Better?

11 min. read By eCompareMo on

If you’re a contributing member of Pag-IBIG Fund and the Social Security System (SSS), one of the benefits is the privilege of taking out a salary loan with these government institutions.

You can count on these government-issued financial tools to give you a low-interest loan at the best term possible.

Do you want to maximize your membership with these government corporations? Learn more about these government loan products, figure out their differences, and get the list of requirements you need when applying for one.

Understanding salary loans

Also known as payday loan in other countries, a salary loan is an amount you borrow from a financial institution that is not secured by any collateral and ideally only loaned for a short term. Usually, it’s smaller compared to more formal types of personal loans.

In the Philippines, the Bangko Sentral ng Pilipinas (BSP) basically follows the same definition. In the guidelines it issued in 2015, the term salary loan has been supplanted by the phrase salary-based general-purpose consumption loan. It is defined by the BSP as the following:

“Unsecured loans for a broad range of consumption purposes, granted to individuals mainly on the basis of regular salary, pension or other fixed compensation, where repayment would come from such future cash flows, either through salary deductions, debits from the borrower’s deposit account, mobile payments, pay-through collections, over-the-counter payments or other type of payment arrangement agreed upon by the borrower and lender.”

What separates this from personal loans, despite the fact that both are general-purpose types of banking products that can be used for a wide range of purposes? According to the BSP, the former is exclusively based on a regular and fixed compensation where the repayments can be deducted.

In contrast, personal loans are more flexible in terms of eligibility and amount you can borrow. They also are stricter in terms of eligibility and requirements.

For government-issued multipurpose loans, Filipinos mainly have two options: the Pag-IBIG Fund multi-purpose loan and the SSS salary loan. If you contribute to both groups and you need some cash in a pinch, then it’s time to compare the two government-backed salary loan products to figure out which one is best for you.

(Read: Beyond Pensions And Loans: 3 Government Savings Programs To Check Out)

Pag-IBIG Fund Multi-Purpose Loan FAQs

What are the requirements for a Pag-IBIG cash loan?

Ready to apply for Pag-IBIG FUND’s loan? Make sure that you meet can meet the following requirements first:

  • Must have made at least 24 monthly membership savings
  • Must have made at least one monthly membership savings in the last six months
  • If the applicant has an existing Pag-IBIG housing loan, then he must be in good credit standing
  • If the applicant has an existing Pag-IBIG loan such as another multi-purpose or housing loan, then he must be in good credit standing and the account has not defaulted
  • Must have prepared sufficient proof of income for submission
  • Must have prepared the following documents:
    • At least two valid IDs
    • Accomplished multi-purpose loan application form
    • SSS or GSIS number
    • Agency code or branch code of the Pag-IBIG branch where you will apply
    • For employed individuals, submit the following documents:
      • Proof of income such as certificate of employment with compensation and most recent pay slips
      • Signature of the employer’s head of office or the authorized signatory
      • Pag-IBIG employer ID number
    • For self-employed individuals, submit the following documents:
      • Photocopy of business permit, commission vouchers, and other documents showing proof of income

What is the interest rate?

Regardless of the calculated loan amount, Pag-IBIG Fund only charges 10.5 percent per annum.

What is the amount I can borrow?

A Pag-IBIG member can borrow between 60 and 80 percent of his total accumulated value (TAV). The percentage is determined by the number of monthly contributions he has made using the following schedule:

  • 24 to 59 months: Up to 60 percent of TAV
  • 60 to 119 months: Up to 70 percent of TAV
  • 120 months and up: Up to 80 percent of TAV

For instance, if you’ve already remitted around P10,000 to your Pag-IBIG Fund account for 25 months, then the maximum allowable amount you can borrow from the agency is P8,000 because based on your number of remittances, you can only borrow up to 60 percent of your TAV.

The bigger your total contribution has been, the more money you can loan. In addition, the longer you’ve been a member, the higher the rate you can borrow.

However, you might notice that your employer only deducts P50 per month on your salary for your Pag-IBIG contribution instead of the actual percentage from your salary. This might be far from the two-percent rate you’re expecting to be subtracted from your take-home pay.

According to the implementing rules and regulations of Republic Act No. 9679, the maximum salary that will be used by employers in computing their Pag-IBIG deductions will be P5,000.

If you want your member contributions to match your current salary, ask your human resource office to change it because anything beyond P5,000 is voluntary.

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How long before I can renew my loan?

Those who have an existing calamity loan must factor in the remaining balance to the total accumulated value.

If you have an existing calamity loan balance of P4,000 and we’re still using the same amount above, then the P4,000 balance will be deducted to the amount you can borrow, giving you a loanable amount of P4,000.

How long can I repay my loan?

Pag-IBIG has imposed a fixed 24-month loan repayment term for all salary loans from the agency, with the payments automatically deducted to the member’s salary through their employers.

Self-employed individuals and overseas workers can pay their balance through authorized over-the-counter payment processors.

How long does Pag-IBIG take to process my application

Once you’ve submitted all documents, wait for at least one week for your application to be processed. However, it might take longer if you haven’t consolidated your records current servicing branch.

Depending on your choice of disbursement, you can collect your loan proceeds thorough any of the following options:

  • Pag-IBIG Citi prepaid card
  • Direct deposit to your account
  • Check collection to your Pag-IBIG branch

What are the fees and penalties I have to worry about?

Pag-IBIG Fund doesn’t charge any amount for processing your loan. However, missing payments will mean that your account will accumulate a 0.5 percent late payment interest every month.

(Read: A Comprehensive Guide To Pag-IBIG Multi-Purpose Salary Loan Application)

SSS Salary Loan FAQ

What are the requirements for an SSS salary loan?

Here’s every requirement you need to pass when you apply for an SSS loan:

  • For a one-month loan, the member must have remitted at least 36 monthly contributions, with six months filed within the last 12 months prior to application
    • Meanwhile, applicants for the two-month loan must have remitted at least 72 monthly contributions,
  • Must not have received final benefit such as total permanent disability, retirement, or death benefit
  • Must be under 65 years old during the time of application
  • Must have prepared the following documents:
    • Member loan application form
    • SSS digitized ID or E-6 acknowledgement stub
    • Two photo-bearing valid IDs
  • For overseas workers, they can submit their salary loan application through the following options:
    • If there is an SSS foreign office in the country, they can submit their application form and other requirements to the representative in that satellite office
    • If there is no SSS foreign representative office in the country, they can send their application form and documents to a relative in the Philippines and give them the authority to transact on your behalf

What is the interest rate?

All SSS loans have a ten-percent interest per annum interest rate and the term will be amortized for 24 months.

What is the amount I can borrow?

Depending on the number of contributions posted by the member, SSS loan applicants can be eligible for either one-month or two-month salary loan. The former allows people to borrow up to P16,000 while the latter can borrow as much as P32,000.

How long before I can renew my loan?

Those who have an existing SSS loan can only take out a new one if they’ve already completed at least 50 percent of their current obligations. The net proceeds will be based on the total loanable amount minus the remaining balance to their current loan.

How can I repay my loan?

Employed members can expect their repayments to be automatically deducted to their salary by their employers.

Other SSS members can remit their payments through SSS branches and online through BancNet. Union Bank account holders can use their online banking portals to settle their balance, as well.

How long does SSS take to process my application?

After submitting your application form, it takes around two to three weeks to process your loan application.

To get your loan proceeds, you can the money through the following options:

  • UnionBank SSS Quick Card
  • EMV Unified Multi-Purpose ID ATM card
  • Check mailed to your employer or to be picked up at your SSS branch

What are the fees and penalties I have to worry about?

SSS charges a one-percent service fee to all loan applications and it will be deducted automatically from your proceeds. Meanwhile, a one-percent penalty per month shall be imposed on accounts that miss their due date. The penalty shall be in effect until the loan has been paid in full.

(Read: SSS Salary Loan Application: A How-To Guide)

Tale of the tape

With the details of both salary loans already given in detail, it’s time to answer the burning question in your head: Which one is better between Pag-IBIG and SSS?

The answer is: It depends on your needs. Since both have their pros and cons, you should carefully look into the specifics of each loan and compare them side by side. To help you see where one excels over the other, we created this comparison table for easier analysis:

Pag-IBIG multi-purpose loan

SSS salary loan

Contributions eligibility

24 monthly contributions

36 to 72 monthly contributions

Loan amount

Up to 80 percent of total accumulated value

Up to P32,000

Interest rate (annual)

10.5 percent

10 percent

Processing time

Up to two weeks

Up to three weeks

Service fee

None

1 percent, deducted to your proceeds

Penalty

0.5 percent of unpaid amount every month

1 percent per month

In almost every category, Pag-IBIG appears to offer you a better deal, especially when it comes to minimum number of contributions you have to make and interest. In addition, the loan can also be processed in as fast as one week, which is greatly beneficial to those who need the money for emergency purposes.

However, SSS fares better in terms of interest rate, which is slightly lower than Pag-IBIG’s. However, the agency requires more contributions to its members before they can take out a loan.

(Read: Pag-IBIG Housing Loan: The Complete Guide To Funding Your Dream House)

Sample computation

When it comes to loanable amount, this where it gets tricky between the two. To understand when the best time is to loan from either of the two, let’s do some quick computation.

Let’s say that Citizen X is a rank-and-file employee that has a gross monthly income P30,000 per month. According to the schedules of contributions from both agencies, his monthly deductions will be the following, employer’s share included:

  • Pag-IBIG contribution – P1,200 per month (voluntarily increased to match the salary)
  • SSS contribution – P1,760 per month

Since Pag-IBIG computes the loanable amount based on the total accumulated value of a member, Citizen X’s total remittance to the agency will be approximately P28,800 by the time he becomes eligible to take out a salary loan. Therefore, his loanable amount during that time will be P17,280.

Meanwhile, regardless of his contributions to the SSS, he can only take out a P16,000 loan after 36 months of deductions. Unlike Pag-IBIG, the government’s social security agency deducts a one-percent service fee to the amount. The total takeaway of Citizen X will be P15,840.

Even a theoretical scenario where he already made 72 monthly contributions to both agencies—an ideal scenario where he can finally take out a two-month salary loan from SSS—Citizen X can borrow up to P69,180 from Pag-IBIG. This amount is 45.79 percent higher than the P32,000 amount he can take out from SSS under the same conditions.

However, this can only be the case if he’s paying his Pag-IBIG contributions based on his actual salary percentage and not the maximum amount prescribed by the law. If Citizen X merely settles on remitting P200 per month to his account, then the computations will be wildly different.

By paying P200 per month under his account, Citizen X can only loan P2,880 after 24 months, which is 60 percent of P4,800. After 36 months, he can only loan P4,320 from Pag-IBIG, which is definitely lower than the minimum amount he can get from his SSS salary loan. Even after a decade of payments, the loan he can take out from SSS will still be higher.

(Read: New Law Increasing SSS Contributions Approved)

Conclusion

Government salary loan programs are great way to get a small amount with great payment terms, low interest rates, and auto-deduction of repayments. However, the best way to maximize either Pag-IBIG or SSS salary loans is by making sure that you’re paying the correct amount based on your salary.

Not only that you’re investing for a bigger amount you can borrow, but you’re also putting more premium on your future.

Sources: The Philippine Star, Pag-IBIG Fund, SSS, The Official Gazette

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