SSS Loan vs Pag-IBIG Loan: Which One is Better for You?

At some point, you’ll find yourself struggling with money. It’s either an unexpected expense has come up or you’re trying to fund a major project and your budget can’t accommodate all your plans.

If you’re currently cash-strapped, two financing options may help you out: the SSS Salary Loan and the Pag-IBIG Multi-Purpose Loan. To help you decide which one will work well for your situation right now, we’ve come up with a simple guide that covers all you need to know about these loans. Read on to learn more about SSS loan vs Pag-IBIG loan.

SSS Loan vs Pag-IBIG Loan: An Overview

Confused about the SSS Loan vs Pag-IBIG Loan? Let’s start with the similarities. Basically, both SSS and Pag-IBIG loans provide short-term financial assistance to their members.

The Pag-IBIG Multi-Purpose Loan or MPL is a cash loan that qualified members may apply for to help them with any immediate financial need.⁽¹⁾

The SSS Salary Loan, on the other hand, is a cash loan given to an employed or self-employed/voluntary member to help them meet short term credit needs.⁽²⁾

Here’s a list of situations where you can use the proceeds of your Pag-IBIG Multi-Purpose Loan:

Minor home improvements
Car-related repairs
Additional capital for your small business
Education-related expenses, such as tuition fee
Purchase of furniture, electronic gadgets, or appliances
Payment of credit card bills and similar utilities
Other needs that require cash

Why Get an SSS Salary Loan or Pag-IBIG Multi-Purpose Loan?

While banks and informal lending institutions can loan borrowers some money, they may not be the best option for those who don’t have assets that can be used as collateral. Also, the payment terms may not be borrower-friendly, as the conditions can be quite strict. In addition, interest rates can be higher for private lenders.

Fortunately, loans from Pag-IBIG and SSS are unsecured. This means you don’t have to put up collateral to avail of a loan. Interest rates are also lower than what many banks offer.

Repayment is also much easier, as it can be just deducted from your salary (for employed members). This means no more trips to the bank or payment center, especially nowadays when it’s safer to stay at home. However, self-employed and voluntary members need to repay their loan at a bank, online application, or payment center.

How Much Can I Borrow from SSS and Pag-IBIG?

SSS Loan Amount: How much is the first loan in SSS?

Since you’re comparing SSS loan vs Pag-IBIG loan, you need to know up to how much the SSS can lend you. For this government agency, it will depend on your number of posted SSS contributions.

You have two SSS loan options:

One-month SSS Salary Loan: This is equivalent to the average of your latest posted 12 monthly salary credits (MSCs) or the amount applied for, whichever is lower.
Two-month SSS Salary Loan: This is equivalent to twice the average of your latest posted 12 MSCs, rounded up to the next higher monthly salary credit or amount applied for, whichever is lower.⁽³⁾

The SSS also reminds borrowing members that the net amount of the loan will be the difference between the approved loan amount and the outstanding balance of any existing SSS short-term loans.

Pag-IBIG Loan Amount: How much is the first loan in Pag-IBIG?

If you’re a qualified member, you can borrow up to 80% of your total Pag-IBIG Regular Savings, which is composed of your monthly contributions, your employer’s contributions, and the dividends that have been accumulated over time.

In case you have an outstanding Calamity Loan, the amount you can borrow shall be the difference between the 80% of your total Pag-IBIG Regular Savings and the balance of your Calamity Loan.

Simply put, the more money that you’ve saved through Pag-IBIG Regular Savings, the higher you can borrow from the institution (granted that you meet the eligibility and documentary requirements).

What are the Loan Interest Rates?

SSS Loan Interest Rates

Interest rates are also among the factors you need to consider when checking the differences and benefits of SSS loan vs Pag-IBIG loan. The SSS charges an interest rate of 10% per annum; this is lower compared to that offered by Pag-IBIG.

However, it’s worth noting that the interest rate computation is based on diminishing principal balance, which reduces interests as the SSS loan is repaid monthly.

The said interest rate will continue to be charged on the outstanding principal balance until the loan is fully paid. When you pay more than your monthly amortization, the excess will go towards the payment of your principal balance

Pag-IBIG Loan Interest Rates

The interest rate of Pag-IBIG’s MPL Program is 10.5% per annum, which is already considered low. Pag-IBIG also says that a significant part of the income they earn from the loan program goes back to the members in the form of dividends.

What are the Requirements?

SSS Loan Requirements

When comparing SSS loan vs Pag-IBIG loan, you must also look into the requirements. That way, you’ll know which between them has a set of requirements that is easier to fulfill.

SSS Salary Loan Eligibility Requirements:

If you’re applying for a one-month loan, you must have 36 posted monthly contributions. Six of these should fall within the last 12 months prior to your application.
If you’re applying for a two-month loan, you must have 72 posted monthly contributions. Six of these must be within the last 12 months prior to your application.
Updated contribution payments
Have not been granted final benefit, which includes total permanent disability, retirement, and death.
Must be under 65 years old at the time of your application
Have not been disqualified due to fraud committed against SSS

SSS Salary Loan Document Requirements

Member Loan Application Form⁽⁴⁾
Digitized SSS ID or E-6 (Acknowledgement Stub) with any two valid IDs; one of these must have a recent photo. Valid IDs accepted are the following: Driver’s License, PRC ID, Passport, Tax Identification Number (TIN) Card, Seaman’s Book, OWWA Card, among man others.

Pag-IBIG Loan Requirements

First, you should be an active contributing member with at least 24 months’ worth of membership savings, as well as sufficient and valid proof of income.

In case you have other loans with Pag-IBIG, such as a housing or calamity loan, your payment records must be duly updated. Otherwise, you’ll not qualify.

Requirements for Pag-IBIG Loan application:

Original Multi-Purpose Loan Application Form⁽⁵⁾
Photocopy of valid ID (Passport, Driver’s License, PRC ID, Police Clearance, NBI Clearance, Voter’s ID, Postal ID, among many others)
Proof of income. See below to know more about this requirement:

For employed borrowers:

Your employer must accomplish the “Certificate of Net Pay” section at the back of your application form. You may also submit a photocopy of your latest pay slip validated by the company’s authorized signatory.

For self-employed borrowers:

Photocopy of ITR, Audited Financial Statements, and Official Receipt of tax payment from bank supported with DTI Registration Certificate and Mayor’s Permit/Business Permit
Original bank statements or passbook for the last 12 months (if your income comes from pension and foreign remittance)
Certified True Copy of Transport Franchise issued by the government (LGU for tricycles and LTFRB for other PUVs)
Original Certificate of Engagement from the business owner
Original Notarized Affidavit of Income

For OFWs:

Employment Contract (1 photocopy of Employment Contract Between Employee and Employer or 1 original copy of POEA Standard Contract)
For household staff and similar profession/situation: Original
Certificate of Employment and Compensation (CEC). This should be supported with a photocopy of the employer’s ID and passport.
Original Income Tax Return filed with the host country or government

Requirements for Pag-IBIG Multi-Purpose Loan release:

For the release of loan proceeds via a payroll account: *Photocopy of the payroll account or disbursement card**
For borrowers who applied through their employer: Photocopy of payroll account* or disbursement card** duly certified by the employer.
For individual applications, present your payroll account* or disbursement card** for authentication.

*Payroll accounts using LANDBANK accounts for disbursement
**LANDBANK, UCPB, or DBP

How Can I Repay my SSS or Pag-IBIG Loan?

sss loan vs pag-ibig loan repayment terms

SSS Salary Loan Repayment Terms

The SSS salary loan is payable within two years, meaning there will be 24 monthly installments. The monthly amortization starts on the second month following the loan approval date, which is due on or before the deadline.

Note that the SSS has loan payment schedules for both regular and voluntary members:

If the 10th digit of the 13-digit ER/HR number ends in:	Deadline of Payment (following the applicable month)
1 or 2	10th day of the month
3 or 4	15th day of the month
5 or 6	20th day of the month
7 or 8	25th day of the month
9 or 0	Last day of the month

Pag-IBIG Multi-Purpose Loan Repayment Terms

Because the Pag-IBIG MPL is a short-term loan, you can pay it within 24 months. What’s great about this loan is that it comes with a deferred first payment, meaning you can delay it for a month. This will give you enough time to prepare for the actual first payment. This is a feature that you need to take note of when you’re comparing SSS loan vs. Pag-IBIG loan.

Employed members can repay their loan amortization through salary deduction. So, if you fall under this borrower category, it’s important that you discuss it with your employer.

Self-employed individuals and OFWs, on the other hand, can repay their loan at any Pag-IBIG branch. The same rule applies to other individual payors/members.

What Happens if I Can’t Repay my Loan?

SSS Salary Loan Penalty

The SSS is quite strict when it comes to repayments, so be wary of the penalty. When you have a loan amortization that is not remitted on time, you’ll incur a penalty of 1% per month until the loan is fully paid.

Pag-IBIG Multi-Purpose Loan Penalty

For Pag-IBIG, the loan penalty is worth 1/20 of 1% of any unpaid amount for every day of the delay. So make sure to pay your Pag-IBIG loan on time to avoid a Pag-IBIG loan penalty.

Can I Renew My SSS Loan? How about My Pag-IBIG Loan?

When comparing SSS loan vs Pag-IBIG loan, you also need to know how the SSS loan will fare as far as renewals are concerned. The SSS will allow your loan renewal only after you have paid at least 50% of the original principal amount, or at least 50% of the term has already lapsed.

According to the SSS, the renewal loan amount is greater than or equal to zero. This is as long as the outstanding balance of the previous loan is already deducted.

As for Pag-IBIG, members can renew their Pag-IBIG Multi-Purpose Loan after paying an equivalent of six monthly amortizations. Your loan renewal will be activated only when you meet all the qualifications listed by the Pag-IBIG Fund and you have submitted all the necessary documents.

The outstanding balance of your first or existing loan will be deducted from the proceeds of your new loan.

Final Thoughts

You should thoroughly compare SSS loan vs Pag-IBIG loan before applying, so you’ll know which between the two has better benefits or better repayment terms.

The SSS Salary Loan has a lower interest rate and is more flexible when it comes to valid IDs and documents. However, it has much stricter rules on penalty. It even comes with a service fee.

The Pag-IBIG Multi-Purpose Loan, on the other hand, may have a number of requirements and even a higher interest rate, but it doesn’t have a processing fee. The penalty for failure to pay the amortization is not as hefty as that of the SSS loan.

Each of them has its own benefits and drawbacks, so study their offerings and requirements carefully. But it all boils down to the number of contributions you’ve made and see to it that your records are updated.

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Sources:

⁽¹⁾ Pag-IBIG Fund Multi-Purpose Loan Program FAQs
⁽²⁾ SSS Salary Loan Definition
⁽³⁾ Loan Amount for SSS Salary Loan
⁽⁴⁾SSS Member Loan Application Form
⁽⁵⁾ Pag-IBIG Multi-Purpose Loan Application Form

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SSS Salary Loan vs. Pag-IBIG Multi-Purpose Loan: Understanding the Differences