The Department of Education has issued DepEd Order No. 020, s. 2026, introducing revised loan terms under the Department of Education's Automatic Payroll Deduction System (APDS) Program.
The major change is significant for DepEd personnel who use APDS-accredited lending facilities: the maximum loan repayment period is now extended from five years to seven years.
The revised policy follows Bangko Sentral ng Pilipinas (BSP) Circular No. 1239, which amended regulations governing salary-based general-purpose consumption loans. Current reporting on the BSP circular confirms that the maximum allowable repayment period for covered salary-based consumption loans was extended to seven years, although the seven-year period is a maximum rather than an automatic entitlement for every borrower.
For teachers and other DepEd employees considering a salary-deducted loan, however, the most important point is this: a seven-year loan is now possible under APDS, but approval still depends on the lending entity's credit evaluation.
What Is DepEd Order No. 020, s. 2026?
DepEd Order No. 020, s. 2026 is titled "Revised Loan Terms of Payment Under the Department of Education's Automatic Payroll Deduction System Program."
The Order further amends the provisions on loan terms under previous APDS issuances, particularly DepEd Order No. 020, s. 2021 and DepEd Order No. 004, s. 2022.
The revised policy allows APDS-accredited lending entities to accommodate loans with repayment periods of up to seven years.
This does not mean that every DepEd employee can automatically choose a seven-year repayment period. Instead, the lending entity must determine whether the borrower qualifies based on its own credit policies, risk assessment, applicable regulations, and the borrower's capacity to repay.
DepEd APDS Loan Terms Now Extend Up to 7 Years
Under the revised APDS rules, only loans with a term not exceeding seven years will be accommodated.
The prescribed contractual interest-rate ceilings are based on the diminishing or declining principal balance method.
According to the Order, the ceilings are:
- 1 year: 7.500% per annum or 0.625% per month
- 2 years: 9.000% per annum or 0.750% per month
- 3 years: 9.660% per annum or 0.805% per month
- 4 years: 9.660% per annum or 0.805% per month
- 5 years: 9.660% per annum or 0.805% per month
- 6 years: 9.660% per annum or 0.805% per month
- 7 years: 9.660% per annum or 0.805% per month
The Order also provides a 6% one-time charge, which must be itemized in the borrower's Disclosure Statement and is deducted upfront from the principal amount.
Importantly, APDS-accredited entities are encouraged to offer rates lower than the prescribed ceilings.
This means borrowers should not assume that every lender will charge exactly the maximum rate stated in the policy.
How Much Is the Monthly Payment for a ₱100,000 Loan?
The annexes to DepEd Order No. 020, s. 2026 provide illustrations using a ₱100,000 principal amount.
The examples show how extending the repayment period lowers the monthly installment while increasing the total interest paid over the life of the loan.
Based on the illustrations provided in the Order:
1-year loan: approximately ₱8,675.74 per month
2-year loan: approximately ₱4,568.48 per month
3-year loan: approximately ₱3,210.78 per month
4-year loan: approximately ₱2,519.97 per month
5-year loan: approximately ₱2,108.02 per month
6-year loan: approximately ₱1,835.49 per month
7-year loan: approximately ₱1,642.61 per month
These figures are based on the Order's illustration for a ₱100,000 loan and should not be interpreted as a guaranteed quotation from every APDS-accredited lender.
The examples demonstrate the basic trade-off clearly: a longer repayment period can make the monthly deduction smaller, but the borrower generally pays more interest over the entire loan period.
How Much Interest Is Paid Over the Full Loan Term?
The difference becomes clearer when looking at the total interest shown in the APDS illustrations.
For the ₱100,000 example:
- 1 year: ₱4,108.91 total interest
- 2 years: ₱9,643.37 total interest
- 3 years: ₱15,588.05 total interest
- 4 years: ₱20,958.02 total interest
- 5 years: ₱26,480.68 total interest
- 6 years: ₱32,154.69 total interest
- 7 years: ₱37,978.52 total interest
There is also a ₱6,000 one-time charge in the illustration.
This is one of the most important details borrowers should consider before choosing a seven-year loan.
For example, the seven-year illustration brings the monthly payment down to around ₱1,642.61, but the total interest is substantially higher than the one-year example.
Therefore, a lower monthly deduction does not necessarily mean the loan is cheaper.
What Is the Effective Interest Rate or EIR?
Another important part of the revised APDS rules is the Effective Interest Rate (EIR).
The EIR gives borrowers a more meaningful picture of the cost of borrowing because it takes into account the interest and applicable charges associated with the loan.
For the illustrations in the Order, the EIR ceilings are:
- 1 year: 21.091% per annum
- 2 years: 16.351% per annum
- 3 years: 14.886% per annum
- 4 years: 13.759% per annum
- 5 years: 13.082% per annum
- 6 years: 12.632% per annum
- 7 years: 12.310% per annum
Borrowers should therefore look beyond the advertised monthly installment and check the Disclosure Statement, interest rate, EIR, one-time charges, total repayment, and other applicable costs before signing a loan agreement.
Does the New 7-Year Rule Mean Everyone Can Get a 7-Year Loan?
No.
This is perhaps the most important clarification in DepEd Order No. 020, s. 2026.
The availability of a repayment period of up to seven years does not automatically qualify every borrower for a seven-year loan.
The APDS-accredited lending entity remains responsible for evaluating the borrower.
Its decision may consider factors such as:
- income and repayment capacity;
- existing financial obligations;
- employment information;
- credit history;
- internal lending policies;
- risk-management requirements;
- applicable laws and regulations; and
- other factors relevant to the borrower's ability to repay.
The Department of Education itself will not participate in or influence the lender's credit evaluation or loan approval process.
DepEd's role is primarily to facilitate payroll deductions in accordance with APDS policies.
Mandatory Financial Literacy Before the Loan
Another notable provision is the requirement for APDS-accredited lending entities to provide borrowers with financial literacy or loan education before the evaluation or release of an APDS loan.
The education may be provided physically or digitally.
At a minimum, it should cover responsible borrowing, loan terms and conditions, interest and other charges, repayment obligations, consequences of non-payment or default, and basic financial management.
Lenders are also required to maintain documentary or electronic records showing that the borrower completed or acknowledged receipt of the financial literacy or loan education.
This provision is particularly important because a loan should not be evaluated solely by looking at the monthly deduction.
Borrowers need to understand the total cost and long-term effect on their income.
What Does the New APDS Policy Mean for DepEd Employees?
For teachers and other DepEd personnel, the seven-year maximum gives borrowers another repayment option.
Someone who cannot comfortably accommodate a large monthly deduction may find a longer repayment period easier to manage.
However, extending a loan for several additional years also means carrying the financial obligation for a longer period.
Before applying, borrowers should compare the monthly installment with their actual take-home pay and existing deductions.
It is also wise to compare offers from APDS-accredited entities instead of automatically choosing the first available loan.
A longer repayment term can provide short-term breathing room, but responsible borrowing requires looking at the total repayment amount, not just the monthly payment.
Key Takeaways on DepEd Order No. 020, s. 2026
The revised APDS policy can be summarized in a few important points:
The maximum APDS loan term is now seven years.
Seven years is a maximum, not an automatic loan entitlement.
The lender decides whether a borrower qualifies.
Interest-rate ceilings are based on a declining or diminishing principal balance.
A 6% one-time charge is included in the Order's prescribed structure and must be itemized in the Disclosure Statement.
APDS-accredited entities may offer rates below the prescribed ceilings.
Borrowers must receive financial literacy or loan education before evaluation or loan release.
DepEd does not approve or guarantee individual loans.
The policy takes effect immediately upon approval and issuance and upon publication through the channels specified in the Order.
Final Reminder for Teachers and DepEd Personnel
The extension to seven years may make salary-deducted loans more manageable for some borrowers, particularly when monthly cash flow is the main concern. The broader BSP policy also recognizes that a longer repayment period can make scheduled payments more manageable while retaining safeguards against excessive borrowing.
Still, a longer loan is not automatically a better loan.
Before signing, check the interest rate, EIR, one-time charges, monthly deduction, total repayment, repayment period, and consequences of default. Ask the lending entity to explain anything that is unclear.
Most importantly, borrow only an amount that you can reasonably repay without putting your regular household expenses and other financial obligations at risk.
DepEd Order No. 020, s. 2026 provides a longer maximum repayment period under APDS, but the decision to borrow—and the responsibility for repaying the loan—remains with the borrower.
This article is for general informational purposes and summarizes the policy details provided in DepEd Order No. 020, s. 2026. Borrowers should review the official Order, Disclosure Statement, and specific loan agreement provided by their APDS-accredited lending entity before making a financial decision.