A lot of Filipinos wonder if they should take out a bank loan at a low monthly rate—like 0.39%—and immediately invest the full amount as a lump sum in Pag-IBIG MP2. On paper, it looks tempting: borrow a big amount, place it in MP2 at 7.1%, and earn the difference.
But does it really work? And is it better than simply investing the same amount you would pay monthly for the loan?
In this article, I’ll break down both strategies using actual computations, real MP2 dividend numbers, and straight fixed-rate loan math (the same method Philippine banks and lenders use). No guesswork. Just pure numbers.
Scenario 1: Borrow Money at 0.39% Per Month and Put It All in MP2
Loan details
- Sample loan amount: ₱500,000
- Interest rate: 0.39% per month (4.68% per annum) – yes, this type of loan does exist, although usually they’re credit-to-cash promo offers of credit card companies
- Term: 5 years (60 months)
- MP2 dividend rate used: 7.1% (last year’s rate)
Most Philippine lenders use straight fixed-rate computation, meaning the total interest is simply:
₱500,000 × 0.39% × 60 months = ₱117,000
Total loan payable over 5 years:
₱500,000 + ₱117,000 = ₱617,000
Monthly amortization
Straight fixed-rate loans produce equal monthly payments:
₱617,000 ÷ 60 ≈ ₱10,283.33 per month
MP2 lump sum growth at 7.1%
Using compounding:
Future value after 5 years = ₱704,558.99
Total MP2 growth = ₱204,558.99
Net result after paying the loan
MP2 profit: ₱204,558.99
Loan interest: -₱117,000
Net gain: ₱87,558.99
Final result: With a lower 0.39% interest, you now earn a much healthier net gain of roughly ₱87,559 over 5 years.
Scenario 2: Skip the Loan and Invest the “Supposed” Monthly Payment in MP2
Instead of borrowing a lump sum, what if you simply invest the amortization amount into MP2 every month for 5 years?
Monthly MP2 contribution
₱10,283.33 per month
60 months
Total contributions: ₱617,000
MP2 future value (monthly compounding at 7.1%)
Future value ≈ ₱741,200
Profit from MP2
MP2 value: ₱741,200
Total investment: -₱617,000
Net gain: ₱124,200
Comparison: Loan-Funded MP2 vs. Monthly MP2 Investment
| Strategy | Total Paid | MP2 Value After 5 Years | Profit |
|---|---|---|---|
| Borrow → Lump-Sum MP2 | ₱617,000 | ₱704,558.99 | ₱87,558.99 |
| Monthly MP2 Contribution | ₱617,000 | ₱741,200 | ₱124,200 |
Even at this lower interest rate, the monthly investment strategy still outperforms, though the gap is smaller. Borrowing becomes more attractive when the interest is lower, yet monthly contributions continue to benefit more from compounding over time.
Why the Monthly MP2 Strategy Still Performs Better
- Every contribution earns dividends immediately.
- Compounding works more effectively with consistent deposits.
- You avoid long-term loan obligations.
- You reduce risk if MP2 dividends fluctuate.
- You stay debt-free while growing your wealth.
Which Strategy Is Better?
With a lower interest rate of 0.39%, borrowing becomes more tempting. However, investing your own monthly contributions in MP2 still gives higher net profit and avoids debt risk.
The loan strategy produces a profit of roughly ₱87,559, while the same cash invested monthly gives around ₱124,200. That’s nearly ₱37,000 more over 5 years with zero debt.
Blogger’s Corner
Borrowing at very low rates to invest can work in theory, but in practice—even with a 0.39% monthly loan—the returns are lower than investing consistently yourself. If you want to maximize growth safely, the disciplined approach of monthly MP2 contributions remains the smarter choice.