What Is the Legal Interest Rate in the Philippines?

It is 6% a year, the rate set by BSP Circular No. 799. In Nacar v. Gallery Frames (2013), the Supreme Court quoted Section 1 of the Circular: the rate for the loan or forbearance of any money, goods or credits, and the rate allowed in judgments, in the absence of an express contract on the rate, is six percent per annum. The Circular took effect on July 1, 2013.

In its 2022 Resolution in Lara's Gifts & Decors v. Midtown Industrial Sales, the Court repeated: "In contracts of simple loan of money, the legal interest rate is currently 6%."

The Civil Code also mentions 6%. Article 2209 says that when a debtor is late in paying a sum of money and there is no agreed interest, the damages are "the legal interest, which is six per cent per annum". But for many years the courts applied 12% to loans and judgments under earlier Central Bank rules. Today's 6% rests on BSP Circular No. 799 as applied in Nacar, not on Article 2209 alone.

Yes. For loans, forbearance and judgments, the rate was 12% a year until June 30, 2013. Nacar said the new rate "could only be applied prospectively and not retroactively". So:

• For the period up to June 30, 2013, 12% a year applies.
• From July 1, 2013, 6% a year applies.
• Judgments that became final and executory before July 1, 2013 "shall not be disturbed".

In Nacar itself, the award earned 12% a year up to June 30, 2013 and 6% a year from July 1, 2013 until fully paid.

For a loan with no agreed interest rate, interest as damages starts from default. Under Article 1169 of the Civil Code, a debtor is in delay from the time the creditor demands payment, in or out of court. Nacar said the 6% is "computed from default, i.e., from judicial or extrajudicial demand". Lara's Gifts (2019 and 2022) added that it runs until full payment.

Nacar also had a separate rule for the period after a money judgment becomes final: 6% a year "from such finality until its satisfaction". In Lara's Gifts (2019), the Court said that rule failed to make clear that, for loans, an agreed interest rate applies until full payment, and the 2022 Resolution restated the rules without that separate step. How interest runs after a final judgment is a question for a lawyer.

For claims whose amount is not yet certain, such as some damages, Article 2213 says interest cannot be recovered "except when the demand can be established with reasonable certainty".

Not as agreed interest. Article 1956 is short:

So a verbal promise of "10% a month" cannot be collected as interest. But this does not mean the borrower can pay late for free. If the borrower is in delay after a demand, the lender can claim legal interest as damages from the date of demand (Lara's Gifts, 2022).

What if the document says "with interest" but gives no rate? In Spouses Abella v. Spouses Abella (2015), the receipt said the money was payable within one year "with interest", with no rate. The Court applied the legal rate. It added that when the legal rate is used as the agreed interest, it is the legal rate "at the time the agreement was executed". The Abella loan was made in 1999, so it carried 12% a year.

Not unless it was agreed. Article 1959 says that interest due and unpaid "shall not earn interest", but the parties may agree to add unpaid interest to the principal so that it earns new interest. In Lara's Gifts (2019), the Court said there should be no compounding of interest, "whether stipulated or legal, unless compounding is expressly agreed upon in writing by the parties or mandated by law or regulation."

There is one rule set by law. Under Article 2212, "Interest due shall earn legal interest from the time it is judicially demanded". In its 2022 Resolution, the Court said this interest on interest is fixed by law and is not left to the court's discretion.

No. It is the fallback rate. Three points:

1. A written agreed rate comes first, provided it is not unconscionable. Lara's Gifts (2022) says that if the agreed rates are unconscionable, the court applies the legal rate prescribed by the BSP. See Is 5% monthly interest legal?
2. Damages that are not loans. For damages whose amount was not certain, Lara's Gifts (2022) says the court may impose interest at 6% a year, at its discretion.
3. Some laws set their own rate. In Sameer Overseas Placement Agency v. Cabiles (2014), the Court held that BSP circulars cannot repeal Republic Act No. 8042, so refunds of placement fees to illegally dismissed OFWs kept the 12% rate set by that law.

These are made-up examples to show how the rules work. They are not advice for any real case.

Ana lent ₱50,000 to Ben. The note Ben signed says "payable on March 1, 2026" and mentions no interest. Ben does not pay. Ana sends a written demand on April 1, 2026. No interest was agreed in writing (Article 1956), but from April 1, 2026 Ben owes legal interest as damages for his delay: 6% a year, or ₱3,000 a year, until he pays.

Mark agreed verbally with his cousin to pay "10% interest". Nothing is in writing, so the 10% is not due. If Mark pays late after a demand, his cousin can claim only the legal rate as damages from the demand.

Talk to a lawyer if you are computing interest for a demand letter or a court case, if your loan started before July 1, 2013 and the 12% period matters, or if a contract has penalty charges on top of interest. Interest rules have changed over the years, and the right rate depends on the type of obligation and the documents. If you cannot afford a lawyer, see Free legal help in the Philippines.