Pension loan is a kind of loan where future pension payments of a retiree or pensioner are used as COLLATERAL. In a typical pension loan, the pensioner will take an upfront lump sum of cash in exchange for a certain number of his pension payments in the future.
In this case, Pension loans is a kind of BDI product where borrowed money is with interest rate at twenty one (21%) per annum – diminishing for the use of future money in the present in exchange of their future pensions. In return the BANK shall have the right to collect those payments in the future, rather than the retiree doing so.
CRITERIA AND GUARANTEE MECHANISM
ALL PENSION LOAN APPLICANTS WILL REQUIRE THE FOLLOWING:
- Spouse’s signature as a co-applicant. For a single or widowed applicant, a relative within the 1st degree of affinity will serve as a co-borrower.
- A Co-maker (can be any of the following): son or daughter and or relative other than mentioned above.
- A duly notarized “SPECIAL POWER OF ATTORNEY” granting the bank the authority to WITHDRAW the payment from the ATM of the pensioner and or other benefits for any unpaid balances.
- A duly notarized “AFFIDAVIT OF UNDERTAKING” assuring the bank of a clean ATM of the pensioner within the duration of the loan term.
- Deed Assignment of Deposit Account with authority to debit his/her savings account for any missed amortization payment
BASIC APPLICATION REQUIREMENTS:
||( up to second degree of consanguinity and affinity with reliable source of income )|
* not later than from one(1) week from date of filing of application
There are a few important points to keep in mind when considering a pension loan.
The person taking the loan must:
- Usually have current monthly pension with disbursement through Automatic Teller Machine (ATM)and or with some other source of income than just the pension itself
- Not be more than 70 year old at the time of filing of application
- Be physically fit to enter an agreement with the bank
- Have a net take home pay of 30% of the gross pension after deduction of amortization or lower than 30% but has other source of income to support his/her daily needs and verified by the Account Officer.
INTEREST, FEES and OTHER CHARGES
The interest rate is tagged at (1.75 %) percent per month diminishing and the service charged (4.00%) percent deducted upfront.
Filing fee ————- P100.00 per application for first time borrowers.
INSURANCE COVERAGE –Insurance Coverage is compulsory under a Group Life Insurance Policy with B.D.I. accredited Insurance Corporation
LOAN TERM – the loan term is set from 3 to 36 months.
PENALTIES for LATE PAYMENT
A delayed amortization payment penalty of 3% per month monthly loan amortization amount will be imposed and collected for all late amortization payment(s). This amount will be collected with the succeeding loan amortization payment.
An initial savings deposit of P300.00 will be collected from the borrower by the Loan Supervisor / Account Officers during the signing of the documents before the release of loan proceeds. A bi-monthly or monthly deposit increment of at least P 100.00 per month will be collected together with the loan amortization payments. The compensating savings deposit will be covered by an authority to debit the outstanding balance of the account for any missed amortization payment and cannot be withdrawn (contracted savings with holdout) during the term of loan.
Withdrawal from the deposit account will be allowed only under the following circumstances:
- Any amount in the balance of the savings account in excess of the principal loan amount may be withdrawn subject to the approval of the Branch Manager.
Ex. Principal loan balance amount is P10,000.00 and the balance in the savings account is P10,500.00 the amount of P 500.00 may be withdrawn by the borrower.
- However, if the client has already fully paid his/her obligation, total savings can now be withdrawn at his option.
- In this case the borrower may no longer intends to borrow, he/she may withdraw any amount from his/her savings account without prior approval from the Branch Manager.
Monthly payments will be collected according to due dates. Frequency and amortization amounts of payments will depend on the net take home pay of the applicant/borrower.
- Equal amortization payments are made on a bi-monthly or monthly basis.
- The bi-monthly or monthly amortization will be computed and pro-rated according to the number of months within the loan term.
Payments will start as follows: (to be revised)
Loans with monthly amortizations: The first amortization payment shall be due the next payday after the release of the loan.
LOAN PROVISIONS, PRECAUTIONARY and OTHERS
If a member dies before the outstanding loan balance with interest and all other obligation has not been recovered, the remaining balance will be deducted from the proceeds of any other benefit payable to the designated beneficiary (ies), including life insurance and monthly payments.
1. Once a loan has been processed, two (2) copies of the Affidavit of undertaking for ATM transactions and two (2) copies of confirmation of account balances must be prepared.
2. One copy for each document should be forwarded to the member for his/her records, while the other is to be retained to the branch for the bank’s file.