A sigh of relief over SSS loan penalty condonation

Last call for member-borrowers of the Social Security System (SSS)!

Under the guidelines laid down in SSS Circular No. 2021-14, a short-term loan qualifies for the program if the loan has been delinquent for at least six months, as of the first day of the condonation period, Nov. 15. Short-term loans include salary loans, calamity loans, those under the Salary Loan Early Renewal Program, emergency loans, and restructured loans under the Loan Restructuring Program implemented in 2016 and 2019.

The condonation program allows member-borrowers to settle their delinquent loans on much lighter payment terms. All outstanding principal and interest components of the loans are consolidated into one new Consolidated “Restructured Loan 1” or “Restructured Loan 2.” The payment can be at one time or in installments.

One-time payment is due in full within 30 days from receipt of the approval of the penalty condonation application. For those choosing to pay by installment, a 50% down payment is required within 30 days upon receipt of the application approval, with the remaining 50% payable in six equal monthly installments.

Like any other loan, installment payments are subject to an interest rate of 3% per annum computed on a diminishing principal balance over the six months. Late payments are subject to a penalty of 1% per month.

The balance of the restructured loan should be zero at the end of the term; otherwise, any unpaid balance, including the proportionate condonable penalty, will become part of a new principal under “Restructured Loan 2.” The modified loan terms require the balance settlement immediately because the “Restructured Loan 2” is due and demandable. If unpaid, the loan will be charged an interest of 10% per annum until fully paid.

Under the program, penalties are condoned 100% under the one-time payment option. For installment terms, 50% of the consolidated penalty is condoned upon receipt of the 50% down payment, with the remaining 50% penalty to be fully condoned after full payment of the restructured loan.

Before member-borrowers can avail of other short-term member loan programs, they should note that “Restructured Loan 1” and/or “Restructured Loan 2” should be fully settled first. Therefore, their payment schedule should be planned accordingly to manage cash flow, balancing cash usage for essential needs, loan payments, and emergencies.

One benefit of the application process is the ease of filing online via the member’s SSS electronic account. Loan payment can be through any SSS Branch or online payment channels, such as GCash and PayMaya. While assisting a client, I found my experience of applying online to be convenient and safe, without exposure to health risks. On the downside, digital filing requires reliable internet connectivity and access to computers, which many Filipinos may not have.

It is always prudent for the member-borrower to keep a copy of the proof of payment for future reference. In case of lapses, such as system glitches or unposted entries, the burden is on the member-borrower to show proof of payment. Should the SSS assess the member-borrower for unpaid loans, the claim can be refuted by presenting proof of payment.

The condonation program is a welcome measure at a time when things have not yet returned to normal.  Since the program’s objective is to provide relief to cash-strapped members, the SSS may want to consider giving member-borrowers more time to settle their loans. One such scheme could involve (a) making the full payment or the 50% down payment payable in 60 days instead of 30 days, and (b) make the installments payable in 12 equal monthly installments instead of just six months.

The SSS may also consider extending the program period up to May 14, or an additional six months from the start of the program, to give more time for the qualified member-borrower to avail of the relief on offer.

For now, a sigh of relief would be better than no relief at all. I hope that qualified members-borrowers will still take the opportunity to settle their loan obligations to avoid additional financial burdens in the form of penalties as a consequence of defaulting on loan payments. On the part of the SSS, the funds collected from the program will help the agency improve its services and provide much-needed benefits to SSS members.