The Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, has increased the maximum repayment period for salary-based consumer loans to seven years, a move aimed at making credit more affordable for borrowers while reinforcing responsible lending standards among banks and other regulated financial institutions.
The new policy applies to salary-based general-purpose consumption loans (SBGPCLs), a category of unsecured loans commonly used to finance education, healthcare, emergencies, travel, household expenses and other immediate personal needs.
These loans are typically repaid through salary deductions, pensions or other stable sources of income.
The BSP said the longer repayment period could help reduce borrowers’ monthly repayment burden and improve cash flow management. At the same time, the seven-year cap is intended to serve as a safeguard against excessive indebtedness.
Previously, SBGPCLs were generally limited to three years, with extensions of up to five years allowed only in meritorious cases.
Under the circular, the seven-year period represents the maximum allowable tenor rather than a prescribed repayment term.
Banks and other BSP-supervised financial institutions are still required to determine appropriate loan maturities based on a borrower’s repayment capacity, taking into account employment status, credit history, sources of repayment, and the purpose and nature of the loan.
The central bank said the framework supports prudent lending practices while promoting access to consumer credit for workers, including teachers and other salaried employees.
The BSP clarified that the new limit applies only to salary-based consumption loans and does not cover other forms of financing such as housing, motor vehicle or credit card loans, which are governed by separate lending frameworks even when repayments are made through salary deduction arrangements.
The policy forms part of the BSP’s broader efforts to promote financial inclusion and responsible borrowing.
The central bank said it continues to work with the Department of Education and partner financial institutions on financial literacy initiatives, including efforts to ensure borrowers retain sufficient take-home pay after meeting their debt obligations.
The BSP also noted that borrowers may explore refinancing options available through institutions such as the Government Service Insurance System (GSIS) and the Social Security System (SSS).