This article explains, in practical legal terms, what happens when a Social Security System (SSS) Salary Loan goes past due, what monetary charges apply, how they are computed, who can be held liable (including employers), and the avenues borrowers have to cure the delinquency. Citations here refer to the Social Security Act of 2018 (Republic Act No. 11199) and standard SSS loan rules and circulars in force in recent years.

1) What is an SSS Salary Loan?

An SSS Salary Loan is a short-term loan granted to employed, self-employed, and voluntary members based on posted contributions and eligibility rules. Core terms commonly include:

Service fee: typically 1% of the principal, deducted upfront.
Interest: 10% per annum on the diminishing outstanding principal (computed monthly).
Term: often 24 months (there are variants), with the first amortization due in the second month after loan release.
Repayment: payroll deduction for employed members; direct payment for self-employed/voluntary members.

You cannot take a new short-term loan while the old one is delinquent or unpaid beyond allowable rules.

2) When does a Salary Loan become “delinquent”?

A loan (or any of its monthly amortizations) is delinquent if it is not paid on or before the due date. Delinquency can be:

Partial (a missed or underpaid amortization), or
Total/default (prolonged non-payment causing the account to age and accumulate charges).

For employed members, delinquency can arise even if the employer deducted the amortization from payroll but failed to remit to SSS on time.

3) What charges apply on delinquency?

A. Contractual Interest (still runs)

The standard 10% p.a. interest on the outstanding principal continues to accrue monthly on a diminishing-balance basis until fully paid.

B. Late-Payment Penalty

1% per month penalty is charged on each unpaid amortization from its due date until remitted/paid.
This penalty is on top of the regular 10% interest on principal.

Practical reading: interest compensates for the time value of the principal still owed; the penalty punishes lateness of the specific amortization(s).

C. Employer-related sanctions (if applicable)

If the employer deducted but did not remit the amortization, SSS may treat the employer as personally liable for the unremitted amounts with penalties, and may pursue administrative/criminal liability under RA 11199 for failure or refusal to remit amounts due to SSS.

D. Collection/offsetting

Outstanding principal + accrued interest + penalties may be offset by SSS against benefits payable to the member (e.g., final/initial retirement, disability, or death benefits). Survivors receive the net benefit after offset.

4) How are charges computed? (Step-by-step)

Let:

P₀ = original principal
i = 10% / 12 per month (contractual interest rate)
A = scheduled monthly amortization (the fixed due per schedule)
m = number of months a specific amortization is unpaid (whole or partial months as SSS counts)

(1) Monthly interest on outstanding principal

Interest for month t = (outstanding principal at start of month t) × (10% ÷ 12).

(2) Penalty on missed amortization(s)

Penalty = (unpaid amortization amount) × 1% × (number of months late).
This applies to each missed amortization until it is fully paid.

Illustrative mini-example (for method only): Suppose one due amortization is ₱1,500 and is paid 2 months late. Penalty = ₱1,500 × 0.01 × 2 = ₱30. Regular interest on the remaining principal also accrues for those months; when you finally pay, you’ll settle: the late amortization, its penalty, plus any accrued interest on the principal that remained outstanding because you paid late.

Tip: If multiple amortizations are missed, compute the 1% per month per installment and sum them. Interest on principal is computed continuously on the remaining principal until payments catch up or the loan is settled.

5) What counts as “default” and what happens then?

While SSS does not typically use “acceleration” language like commercial banks, prolonged non-payment can lead to:

Ballooning charges (10% interest on principal continues; 1%/month penalty per missed installment).
Loan ineligibility for new short-term loans.
Offsetting against claimable benefits (retirement/disability/ death).
Demand/collection from the member and (for employed borrowers) from the employer who failed to remit payroll-deducted amortizations.

6) Employer liability in detail (employed borrowers)

Employers must deduct and promptly remit due amortizations.
If an employer fails to remit what it deducted, SSS may:
- Post civil liability for the unremitted loan payments with applicable penalties (SSS commonly imposes 1% per month penalty on late remittances of loan amortizations),
- Pursue criminal prosecution under RA 11199 (failure or refusal to remit amounts due to SSS may be penalized by fine and/or imprisonment), and
- Hold the employer directly answerable to SSS without prejudice to the employee’s right to credit the deductions that were taken from wages.

For employees: If your payslip shows “SSS loan deduction,” keep copies. If SSS records do not reflect those remittances, promptly file a report/complaint so SSS can go after the employer while crediting your account as appropriate.

7) Effect on benefits and claims

Retirement/Disability/Death: SSS automatically offsets any unpaid salary loan balance, accrued interest, and penalties from payable benefits.
Short-term benefits (e.g., sickness/maternity): processing typically continues, but SSS may hold or apply payable amounts to your loan arrears where rules allow.
Final settlement: Upon full offset, the loan is closed; any balance of benefit is released to you (or your beneficiaries).

8) Condonation, restructuring, and cures

SSS periodically opens Loan Restructuring/Consolidation with Penalty Condonation windows. Typical features:

Condonation (partial or full) of penalties (not usually of principal or base interest).
Restructuring of the remaining balance into a new installment plan.
Eligibility criteria and application periods are defined by SSS circulars.

Outside special programs, you can:

Pay all arrears (missed amortizations + penalties + accrued interest) to restore good standing.
Advance payments to reduce the outstanding principal faster (confirm posting rules before making lump-sum payments).

Because condonation programs are time-bounded and rule-specific, check the latest SSS announcements before assuming availability.

9) Record-keeping and dispute handling

Keep loan disclosure statements, receipts, and payslips with SSS deductions highlighted.
Regularly check your SSS online account for postings.
If entries are missing or amounts seem off:
1. Reconcile with your receipts/payslips,
2. File a member assistance request at an SSS Branch/online portal with documentary proof,
3. For employer non-remittance, file a complaint so SSS can investigate and enforce.

10) Frequently-asked points (quick answers)

Q: Will my loan “expire” if I ignore it long enough? A: No. SSS will continue to accrue interest and penalties per policy and eventually offset from benefits you or your heirs would otherwise receive.

Q: Does the 1% penalty apply to the whole outstanding loan? A: It is ordinarily computed per missed amortization (amount due that month), per month of delay. The 10% interest continues to apply on the unpaid principal.

Q: Can I take a new salary loan while delinquent? A: No. You must settle or restructure the arrears first.

Q: What if my employer deducted my amortization but SSS shows none posted? A: Bring payslips and report to SSS. The employer may be held liable and penalized; SSS can correct your account based on proof.

Q: When I retire, will SSS take everything if my loan is big? A: SSS will offset the total loan obligation first. Any net benefit after offset is released to you; if the benefit is less than the obligation, the offset will reduce or fully settle the loan per SSS rules on final claims.

11) Practical compliance checklist

Know your due dates. First payment typically falls two months after release.
Enroll in auto-pay (if self-employed/voluntary) and monitor postings online.
Act fast on any missed installment—every month adds 1% penalty per missed installment.
Keep documents. Payslips, ORs, loan disclosure, and SSS online screenshots are your best evidence.
Watch for condonation windows. They can substantially reduce accumulated penalties.

12) Bottom line

For delinquent SSS Salary Loans, expect two layers of cost to run until cured:

10% per annum interest on outstanding principal, and
1% per month penalty on each unpaid amortization.

Delays are expensive—but they are also fixable through prompt payment, restructuring, or penalty condonation when offered. Employers who fail to remit deducted amortizations face separate liability. Finally, unpaid loans do not disappear; they are commonly offset against future SSS benefits to protect the fund.