Borrowers will now have more time to settle salary-based consumption loans after the Bangko Sentral ng Pilipinas (BSP) increased the maximum repayment term to seven years from three years previously.

In a statement on June 19, the BSP announced that it has updated regulations for salary-based general-purpose consumption loans (SBGPCLs). This policy adjustment seeks to make credit “easier to repay while still encouraging responsible borrowing.”

This move extends the previous regulatory ceiling, which generally limited such loans to three years and allowed five-year tenors only in “meritorious cases.”

SBGPCLs are unsecured facilities that are intended for immediate needs such as education, healthcare, and emergencies, and are typically repaid through a “stable cash flow” such as salaries or pensions.

According to the regulator, the new seven-year ceiling applies broadly across the workforces, including teachers and other employees, groups that represent a significant portion of the consumer credit landscape.

By extending the maximum tenor, the BSP aims to ensure payments are “more manageable” while maintaining a limit that serves as a “safeguard against excessive borrowing.”

Under the new circular, the seven-year window represents the maximum allowable tenor, not a fixed loan term,” the central bank clarified.

Lenders, the BSP said, must still assess a borrower’s ability to repay by reviewing income sources, employment status, credit history, and the purpose of the loan, a requirement seeking to promote responsible lending and maintaining financial stability.

This policy shift specifically targets consumption-based credit and excludes longer-term financing like housing or motor vehicle loans.

To further assist debtors, the BSP noted that borrowers may also “explore refinancing options” through state-run insurers such as the Government Service Insurance System (GSIS) and the Social Security System (SSS). (Derco Rosal)