THE Bangko Sentral ng Pilipinas (BSP) is proposing more flexible repayment terms for salary-based personal loans, shifting to a “principles-based approach” that will allow lenders to determine tenors based on the creditworthiness of borrowers.
In a draft circular, the central bank said it aimed to enhance regulations governing salary-based general-purpose consumption loans to provide greater repayment flexibility to salaried borrowers, including teachers, while ensuring adherence to prudent credit standards.
“Consistent with this objective, the revised regulations move away from a prescriptive prudential limit on loan tenor toward a principles‑based approach,” the BSP said.
Under the proposed framework, BSP-supervised financial institutions (BSFIs) will be expected to set the loan tenor and other terms following a thorough assessment of a borrower’s ability to pay, sources of repayment, repayment history and the purpose of the loan.
The repayment period may also be mutually agreed upon by the lender and borrower, subject to prudent credit controls.
The draft rules move away from a prescriptive prudential limit toward a more flexible approach, with lenders discouraged from relying on automatic approvals based solely on salary multiples or similar formulas. Instead, institutions must conduct comprehensive creditworthiness assessments before granting loans.
While allowing flexibility, the BSP retained guardrails on loan maturities. The original loan term should not exceed three years, although longer maturities may be allowed in meritorious cases provided that these do not go beyond five years. Loan tenor and repayment structure must still be aligned with the borrower’s capacity to pay.
The central bank also proposed stricter rules on renewals, requiring lenders to reassess borrowers’ repayment capacity and confirm continuing creditworthiness before extending or renewing loans. Renewals will also require payment of accrued interest and a substantial reduction in outstanding principal.
The draft circular further clarifies the scope of salary-based general-purpose consumption loans, which cover unsecured credit granted primarily on the basis of regular salary, pension, or fixed compensation and used for education, hospitalization, emergencies, travel, household and other personal consumption needs.
The central bank said that repayments may be made through salary deductions, deposit debits, mobile payments, or other agreed arrangements.
Credit card receivables, motor vehicle loans, housing loans and loans for business or income-generating purposes are excluded from the coverage even if repayment is made through salary deduction schemes.
The BSP also plans to enhance reporting requirements, including additional information on salary-based consumption loans granted to teachers, particularly those enrolled under the Department of Education’s Automatic Payroll Deduction System.
