With the suspension of the Usury Law and the removal of interest ceilings, the parties are generally free to stipulate the interest rates to be imposed on monetary obligations. As a rule, the interest rate agreed by the creditor and the debtor is binding upon them. This rule, however, is not absolute.
In a recent case, the SC again dealt with the validity of interest agreed by the parties, stating that stipulated interest rates are illegal if they are unconscionable and the Court is allowed to temper interest rates when necessary. In exercising this vested power to determine what is iniquitous and unconscionable, the Court must consider the circumstances of each case. What may be iniquitous and unconscionable in one case, may be just in another.
[See also Excessive and Unconscionable Interest Rates in the Philippines]
In that case, the SC reduced the interest rate from 18% to 12% per annum, noting, among others, that the amount involved has ballooned to an outrageous amount four times the principal debt.
Indeed, there is no hard and fast rule to determne the reasonableness of interest rates. Stipulated interest rates of 21%, 23% and 24% per annum had been sustained in certain cases.
On the other hand, there are plenty of cases when the SC equitably reduced the stipulated interest rates; for instance, from 18% to 10% per annum. The SC also voided the stipulated interest of 5.5% per month (or 66% per annum), for being “excessive, iniquitous, unconscionable and exorbitant, hence, contrary to morals (“contra bonos mores”), if not against the law”. The same is true with cases involving 36% per annum, 6% per month (or 72% per annum), and 10% and 8% per month. In these instances, the SC imposed the legal interest of 12%.
Just to be clear, “legal interest” doesn’t mean that anything beyond 12% is “illegal”. It simply means that in a loan or forbearance of money, the interest due should be that stipulated in writing, and in the absence thereof, the rate shall be 12% per annum.
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Sources: Trade & Investment Development Corporation of the Philippines vs. Roblett Industrial Construction Corporation (G.R. No. 139290, 9 May 2006); Development Bank of the Philippines vs. Court of Appeal; Garcia vs. Court of Appeals; Medel vs. Court of Appeals; Security Bank and Trust Company vs. RTC Makati; Spouses Solangon vs. Salazar; Cuaton vs. Salud; Ruiz vs. CA; Eastern Shipping vs. Court of Appeals, G.R. No. 97412 July 12, 1994.
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Dear Attorney,
I am an OFW who borrowed 15000pesos payable in 1 month from a lending agency which was referred by my recruitment agency. At first they charged me 16957NT around 24000pesos but I disputed and they lowed down to 15240NT (around 22000pesos) which is still I find very excessive. Is the interest they charged reasonable according to the law? What is the maximum interest rate allowed for lending agencies? By the way, it was very late when I found out that I need to pay such amount because they did not informed me before they released the money. And unfortunately, I have used the money to pay the balance of my placement fee.
I would highly appreciate any advice/opinion you could give us.
You can sue them also of fraud for not stating the amount of interest in your contract and it will render the contract void .
Same as my problem mam.. I borrowed 80000 pesos with a 4.5percent sumthing interest for one year.. But i have to pay it in nt.. So my monthly is 6955nt for 12 months… If i compute it 83460nt… So that is around 136000pesos.. It was late when they orient me about d payment..my check is ready to release and i needed it badly for my placement fee and payment for my debt from friends..which i used it when i was applying.. Now mam i want to pay the full amount of 83460pesos supposedly… Because my mother lend me money from her pension..wud it b possible mam
My case is different.
I want to take a loan shark to court.
I owed this person 70k for more than 2yrs. paying her 10% interest per month. Actually that lead to that 70k because she added up the interest of it every time I failed to pay inprevious months. The interest itself is hard on me when until then I have difficulty paying it.
Now I want to pay her gradually without paying that much interest every month by taking her to court.
How can I do that to start with?
Thank you.
can you please give me a clarification and goverment law regarding with my loan interest..i got 65,000 pesos loan lending, payable by 6 months and this became 88000+..in monthly payment is morethan 14K, is this legal interest policy by the lending corporation..please reply..thanks
Borrowers beware, usury law was disabled.
And legally if you agreed to borrow at a certain percentage, be it more than 12% is legal; because you had “agreed”..like in a contract or any written form.
The 12% is imposed if there is no agreed interest rate and there is no written proof of agreement.
PLEASE DO NOT BORROW IF YOU CANNOT PAY, DO NOT AGREE IF YOUR REALLY MEAN NO! SHINY MONEY!!!
Dear Atty,
May katanungan lang po ako dahil nagloan po ako sa isang lending company ng 200,000 nakapagbayad ako ng 2 months worth 67,000 pesos dahil gusto ko na syang ifull payment on the third month hindi ho sila pumayag na hanggang sa third month lang na interest yung babayaran ko gusto nila pabayaran yung 5 months na interest na aabot sa 74,000+ humingi ho ako ng kopya kung paano nila kinalculate yung amount kaso ho ang binigay nila ay table of amortization hindi ko ho maintindihan kung paano ho ganon kalaki yung interest ni wla man lang break down sa binigay na data. so umabot ho ng higit isang taon kasi nasa ibang bansa na kami. ang sabi nila nagpapataw daw ho sila ng 7 percent per day sa penalty charge lang ho yang. binasa ko yung lending rules sabi ho dapat nka stipulate kung paano dapat ito nakadisclose sa umutang. anu po ba ang dapat kung gawin dito atty sana po maliwanagan nyo po ang aking isipan tungkol dito. Salamat po and God bless.
Dear Atty,
Borrowed money from online loan and accidentally my phone was stolen the reference code for payment was lost also.And the amount of loan was 10k but when i received the loan it was 8k only due to service charges and other charges.I was not able to pay on the due date and after 22 days the loanable amount was already balloon to 15,550 .And 3 days ago already settled my loan amount which is 10k and yet still i have to pay the interest charges of 5,550. Is it really over for just 22 days ganun na po kaagad interest .Ano po ba dapat gawin Atty. ordinary employee lang din po ako ang over naman po ung charges nila.
i was able to acquire a loan from one of our neighbors here in brgy commonwealth..our loan ballooned to 10k..there’s no formal contract on the said loan..the problem is, the interest is very high and it runs 20% every week..i receive my pay every two weeks, so that means i need to pay 40% interest on my existing loan..is that even legal? i was begging the lender to stop adding interest since they’ve already earned so much money since i’m unable to pay them in full each time i receive my pay. So the result is, the remaining balance will gain interest again after two weeks which is 40% (20% per week)
Hi Ryan. Text me at 09993352091
Usury laws are to protect the poor. That there are no usury laws in the Philippines is no right. That there is a VAT which is regressive is not right. This country will NEVER get right as long as the masses are uneducated and religious.
govt. employed po ako humingi ng tulong ko ang co-worker ko makautang sa kapatid ko ng 71k and she was granted and signed an agreement of 5% monthly ATM as collateral. After several months She accused me of grave misconduct sa ombudsman na ako daw ang nagpapautang kasi ayaw na nya magbayad at nagpalit pa ngATM card. Pwede po ba ako makasuhan? Salamat po.
someone lent us 5k and its interest is 10% per month.der r times that we fail to pay r monthly interest but once we hav money we pay the interest d following month.can we b sued by the lender even if we r paying d monthly interest for 2 years now, simply because we fail to pay d interest for a month?
120% per annum interest rate as to the stipulation of the contract is deem more than a sharp or crocadile that swallowed everything she grabs around her sorroundings.