UMVA has learned that the central bank has lifted the ceiling on salary‑based loan terms, extending the maximum repayment period to seven years and reshaping how employees can manage their cash flow.
For years, teachers and other salaried workers have pleaded for longer horizons to ease the strain of everyday expenses, and this decisive move finally answers that call.
According to information obtained by UMVA, the new circular emphasizes that these unsecured consumer loans—used for education, health, emergencies, travel or household needs—must still be granted under strict credit standards and fair practices.
Previously capped at three years, with a rare five‑year extension, the revised rule now permits lenders to stretch repayment up to seven years, while still requiring banks to gauge each borrower’s true capacity to pay.
Assessments will dig deep into sources of income, employment stability, credit history and the loan’s purpose, reinforcing responsible lending and the central bank’s mandate for financial stability.
“A longer repayment period makes payments more manageable, while the seven‑year limit acts as a safeguard against over‑borrowing,” the statement explained, highlighting the balance between flexibility and prudence.
Financial institutions must also factor in a borrower’s total personal and household debt, including co‑maker obligations, and ensure enough disposable income remains after debt servicing.
Renewals or extensions will no longer be granted without a fresh creditworthiness review, and any extension must be accompanied by paid‑up interest and a reduction in the principal balance.
The circular mandates a “clean‑up of principal” policy, forcing lenders to set clear repayment targets and block endless roll‑overs that leave borrowers trapped.
When borrowers seek to transfer a loan to another lender for better terms, the original debt must be fully settled before the move.
For longer‑term financing—such as housing, vehicle or credit‑card loans—borrowers can turn to other products not bound by the seven‑year cap, including facilities from state‑run institutions.
UMVA can exclusively reveal that the central bank is also partnering with the education department and financial institutions to boost financial literacy, ensuring workers keep enough take‑home pay after repayments.
