Update December 2012: Finally, the SSS improved its salary loan program! Go to our article on the improved SSS salary loan program.
The SSS salary loan interest rate is not as cheap as we think.
It’s important that we remember this so we don’t take our SSS loan lightly, and so that we don’t borrow just to buy things we don’t really need.
In my previous workplace, some of my co-workers borrow money from the SSS thinking the loan is a pure benefit. They spend it all to celebrate their birthdays or to buy fancy gadgets/appliances.
Sa unang tingin kasi, yong 10 percent na annual interest rate ay mababa lang, na wala pang 1 percent a month. Pero kung i-compute mo talaga yong total cost ng loan, mas mataas ang nakuha sa iyo kesa sa 10 percent interest. Idagdag mo pa rito yong 1 percent service fee.
Bakit? Kasi, SSS does not give you the total amount of your loan, as posted in the Loan Amount box. SSS deducts immediately the total interests for the first 12 months.
For example, pag ang loan amount mo ay 20,000 pesos payable in 2 years, SSS doesn’t give you the whole 20,000. It deducts the first-year interest and the one-percent service fee, so you get only about 18,228 pesos. In reality, the total interest you pay would be nearly 4,000 pesos.
I-compare natin sa Credit-to-Cash loan ng BPI Classic Card. (I use BPI as an example, but there are others with similar or lower rates.) If you borrow 20,000 pesos, you really get 20,000 pesos, and the total interest you would pay for 24 months is about 3,840 pesos.
What I’m really trying to say is:
Although the SSS salary loan interest rate is lower than many others such as pawnshop rates and other bank personal loan rates, hindi pa rin siya ganong kababa.
So, we should not take SSS loans lightly, thinking that they’re super low-cost loans. We should use them for very important things.
Related Article: Low Interest Personal Loans in the Philippines