A number of Social Security System (SSS) members have written to inquire about various concerns, and I would like to share some of them here for the information of other members.
Mr. E. would like to know why his application for salary-loan renewal submitted in January 2015 was rejected, when he had already paid in advance more than 50 percent of the loan that he took out in June 2014 and started paying in October of the same year.
Answer: While the guidelines allow the renewal of the salary loan upon payment of 50 percent of the principal amount plus interest, the payment must be in accordance with the schedule of amortization payment. The guidelines provide that salary loans must be paid in 24 monthly installments, thus, the 50 percent must be paid in 12 months. The 12-month period in this case will fall in September 2015, which is also the renewal period.
Another member, Mr. G., wrote to ask why the P700 loan he took out in 1981 had ballooned to P10,000, which was deducted from his disability benefits.
Answer: Accrued penalties and interests are the main reasons that outstanding loan balances could balloon to more than 10 times the original loan amounts depending on how long they have remained unpaid. It is regrettable that members who have outstanding loan balances at the time of applying for terminal benefits (retirement, total disability or death in the case of member-beneficiaries) will have to settle their liabilities first. In the case of Mr. G., instead of enjoying his benefits immediately, the outstanding amount was deducted from his benefit proceeds. It is best, therefore, that loans are paid on time or within the payment period.
To recap the salary-loan guidelines, it is noteworthy to mention that:
- A one-month salary loan is equivalent to the average of the member-borrower’s latest posted 12 monthly salary credits (MSCs), or amount applied for, whichever is lower.
- A two-month salary loan is equivalent to twice the average of the member-borrower’s latest posted 12 MSCs, rounded to the next higher monthly salary credit, or amount applied for, whichever is lower.
- The net amount of the loan shall be the difference between the approved loan amount and all outstanding balance of short-term member loans.
Interest and penalty
- The loan shall be charged an interest rate of 10 percent per annum based on diminishing principal balance and shall be amortized over a period of 24 months.
- Interest of 10 percent shall continue to be charged on the outstanding principal balance until fully paid.
- Any excess in the amortization payment shall be applied to the outstanding principal balance.
- Loan amortization not remitted on due date shall bear a penalty of 1 percent per month until the loan is fully paid.
Service fee
- A service fee of 1 percent of the loan amount shall be charged and deducted from the proceeds of the loan.
Loan renewal
- Renewal shall be allowed after payment of at least 50 percent of the original principal amount and at least 50 percent of the term has lapsed.
- Proceeds of renewal loan is any amount greater than or equal to zero as long as the outstanding balance on the previous loan is deducted.
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For more information about the SSS and its programs, call our 24-hour call center at (632) 920-6446 to 55, Monday to Friday, or send an e-mail to member_relations@sss.gov.ph.
Susie G. Bugante is the vice president for public affairs and special events of the Social Security System. Send comments about this column to susiebugante.bmirror@gmail.com.