What Is the “Finance Charge” Mentioned in the SSS Salary Loan Disclosure Statement?

Have you ever checked your SSS Salary Loan Disclosure Statement and noticed the term “Finance Charge” — and wondered what exactly it means?

Many SSS members get confused when they see it, especially first-time borrowers who think it’s an extra hidden fee. The truth is: it’s not an additional charge, but rather a required disclosure under Philippine lending rules.

In this article, we’ll explain what the finance charge is, how it’s computed, and how it affects your SSS Salary Loan.

🧾 What Is the Finance Charge in the SSS Salary Loan?

The “Finance Charge” in your SSS Salary Loan Disclosure Statement represents the total cost of borrowing — the total amount of interest and service fees you’ll pay over the life of your loan.

💡 In simple terms:
Finance Charge = Total Interest + Service Charge + Other Loan-Related Fees

It shows you the real cost of the loan, not just the amount you borrowed.

💡 Why Does SSS Include a Finance Charge?

Under the Truth in Lending Act (Republic Act No. 3765), lenders — including government institutions like SSS — are required to show borrowers how much their loan actually costs.

That’s why you’ll see these on your SSS Salary Loan Disclosure Statement:

Amount Financed — the actual amount you’ll receive after deductions
Finance Charge — the total interest and fees you’ll pay over the term
Total Amount Payable — the full repayment (principal + interest + charges)

This makes SSS loan terms transparent and easy for members to understand.

⚙️ Components of the Finance Charge

The finance charge on your SSS Salary Loan usually includes the following:

Component	Description	Example (₱20,000 loan)
Interest	8% per annum, computed on the diminishing principal balance	₱1,600 per year
Service Charge	1% of the approved loan, deducted upfront	₱200
Pro-Rated Interest	Charged from loan approval date until end of the following month	₱219.18 (example)
Total Finance Charge	Total cost of borrowing	₱2,019.18

So in this example, your disclosure statement might show something like:

Finance Charge: ₱2,019.18
Total Amount Payable: ₱22,019.18

🧮 How Is Interest Computed?

The interest on SSS Salary Loans is fixed at 8% per annum, but it’s based on a diminishing balance. This means you only pay interest on the remaining unpaid balance each month — not on the full amount.

Here’s how it typically works:

Month 1: Interest = ₱20,000 × 8% ÷ 12 = ₱133.33
Month 2: Interest = (₱20,000 − ₱833.33 principal) × 8% ÷ 12 = ₱127.78
…and so on until the loan is fully paid.

Your monthly amortization stays the same, but the portion that goes to interest decreases while the portion that goes to principal increases.

📆 Sample Finance Charge Breakdown

Loan Detail	Example
Loan Amount	₱20,000
Loan Term	24 months
Interest Rate	8% per annum
Service Charge (1%)	₱200
Pro-Rated Interest (approx. 50 days)	₱219.18
Total Finance Charge	₱2,019.18
Total Amount Payable	₱22,019.18

This means that while you received ₱19,580.82 (after deductions), your total repayment over 24 months will be ₱22,019.18 — including interest and service charge.

💻 Try the SSS Salary Loan Calculator

Before applying, estimate your finance charge, monthly payments, and total amount payable using the
👉 SSS Salary Loan Calculator

This free tool helps you:

Compute your monthly amortization
Estimate your finance charge
Know how much you’ll actually receive vs. total repayment

👩‍💼 Who Can Apply for the SSS Salary Loan?

Loan Type	Contribution Requirement	Other Conditions
1-Month Loan	36 posted contributions (6 within the last 12 months)	Currently employed
2-Month Loan	72 posted contributions (6 within the last 12 months)	Currently employed
All Loans	No existing overdue SSS loan	Up-to-date employer remittances

💰 Repayment Terms and Rules

Term: 12 months (1-month loan) or 24 months (2-month loan)
Interest Rate: 8% per annum
Service Charge: 1% upfront
Penalty: 1% per month for late payments
Payment Mode: Salary deduction or voluntary remittance
Early Repayment: Allowed anytime, no penalty

⚠️ Common Questions About Finance Charge

1. “Is the finance charge an extra fee?”

No. It’s not an additional or hidden fee. It’s the total cost (interest + service charge) shown for transparency.

2. “Why is my finance charge amount high?”

It depends on your loan term and total amount borrowed — the longer the term, the higher the total interest.

3. “Do I pay the finance charge upfront?”

No. Only the service charge and pro-rated interest are deducted upfront. The rest of the interest is paid monthly.

4. “Can I reduce my finance charge?”

Yes — by paying your loan early or avoiding penalties, since early settlement reduces the remaining interest.

5. “Does finance charge mean my loan is approved?”

Yes. If your disclosure statement shows the finance charge and amount financed, your loan is already approved and ready for release.

💡 TL;DR (Summary)

The Finance Charge is the total cost of borrowing your SSS Salary Loan.
It includes interest, service charge, and pro-rated interest.
It is shown for transparency under the Truth in Lending Act.
Your monthly amortization already covers the finance charge — no hidden fees.
Use the SSS Salary Loan Calculator to estimate your finance charge before applying.

✅ In short:
The Finance Charge simply shows how much your loan truly costs over time — not an extra payment. By understanding this figure, you can budget better, avoid surprises, and plan your SSS Salary Loan wisely.