Changing the manner in collecting the 2% Service Fee

The 2% Service Fee will now be collected as an upfront deduction from the loan proceeds at the time of loan release.

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Dear Valued Coop Members,

We would like to inform you that, effective Sep 1, 2026, the Cooperative will implement a change in the manner of collecting the 2% Service Fee charged on all approved loans under board resolution BR No. 2026-13 Modifying and Regulating the manner of collection of the two percent (2%) Service Fee on loans.

 

Previous Practice:

The 2% Service Fee was added on top of the loan and spread out evenly across the loan term — collected together with the regular monthly amortization. The fee itself did not earn additional interest; it was simply divided by the number of months and added to each installment.

 

New Practice:

The 2% Service Fee will now be collected as an upfront deduction from the loan proceeds at the time of loan release. This means the fee will be deducted directly from the approved loan amount before the net proceeds are disbursed to the member and will no longer appear as part of the monthly amortization.

 

Sample Computation:

To help illustrate, here is an example using an approved loan of ₱100,000, payable in 24 months, at 20% per annum interest (Diminishing Balance Method), with a 2% Service Fee and a flat ₱50 Filing Fee:

 

	Old Method (Service Fee Amortized)	New Method (Service Fee Upfront)
Approved Loan Amount	₱100,000.00	₱100,000.00
Monthly Principal + Interest (Diminishing)	₱5,089.58	₱5,089.58
Fee Portion Added per Month (₱2,000 ÷ 24, no interest)	₱83.33	—
Monthly Amortization	₱5,172.91	₱5,089.58
Total of 24 Monthly Payments	₱124,149.93	₱122,149.93
Filing Fee (one-time, upfront)	₱50.00	₱50.00
Service Fee (one-time, upfront)	— (already spread into the amortization)	₱2,000.00
Net Proceeds Received at Release	₱99,950.00	₱97,950.00
Total Amount Paid Over the Life of the Loan	₱124,199.93	₱124,199.93

 

 

      What this means: The total amount you pay over the life of the loan is exactly the same either way — ₱124,199.93 — since the service fee itself is a fixed ₱2,000 regardless of

when it's collected. What changes is when you pay it:

•     Under the New Method, you receive ₱2,000 less at release, but your monthly amortization is lower (by about ₱83.33/month), since the fee is no longer mixed into

your installments.

•     Under the Old Method, you receive more cash upfront, but your monthly amortization is slightly higher for the full term.

 

Reason for the Change:

 

•     Aligns and comply with standard lending industry practice. Origination/service fees deducted at loan release (like how banks, Pag-Ibig Fund, SSS and other lending institutions

treat "loan origination fees") is a widely recognized practice.

 

•     Removes the fee from the amortization schedule, lowering the effective interest rate disclosure. Since the fee is no longer baked into the installment computation, your Truth-

in-Lending disclosure (required under CDA MC 2012-05) becomes cleaner — the effective interest rate reflects the loan's actual cost of money, with the service fee shown separately as a one-time, transparent deduction rather than folded into recurring payments.

 

•     Improves the cooperative's cash flow and liquidity. The service fee is recognized as fully collected at release rather than trickling over months or years, giving the cooperative

more predictable, front-loaded revenue to reinvest in loanable funds for other members.

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