Is a loan agreement valid in the Philippines without notarization?

Yes. Under Article 1356 of the Civil Code of the Philippines, contracts are obligatory in whatever form they may have been entered into, provided all the essential requisites are present. A loan agreement signed by both parties is fully valid and enforceable in the Philippines without notarization. However, notarization before a Notary Public commissioned under the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC) converts the agreement into a public document, which carries presumption of due execution and authenticity in court — strongly recommended for any loan above modest amounts. Notarization is mandatory if the agreement is accompanied by a real estate mortgage (the REM itself must be notarized and registered with the Registry of Deeds).

What is the maximum interest rate I can charge in the Philippines?

There is no fixed maximum rate. The Usury Law (Act No. 2655) was effectively suspended in the Philippines by Central Bank Circular No. 905 (Series of 1982), meaning the parties may stipulate any rate of interest by mutual agreement. However, Philippine courts retain the power under Article 1229 of the Civil Code, in conjunction with Articles 19, 1306, and 1409, to reduce interest rates found "iniquitous, unconscionable, or excessive." The Supreme Court has consistently struck down or reduced rates of 5%-7% per month (60%-84% per year), commonly bringing them down to 12% per annum (Spouses Castro v. Tan; Medel v. CA; Macalinao v. BPI). The legal rate where no rate is stipulated is 6% per annum (BSP Circular 799-2013). For consumer loans, also disclose the effective rate under the Truth in Lending Act (RA 3765).

What happens if I lend money in the Philippines without a written interest stipulation?

Article 1956 of the Civil Code of the Philippines is categorical: "No interest shall be due unless it has been expressly stipulated in writing." If you and the borrower agreed orally to charge interest but did not put the rate in the written agreement, no interest is collectible — only the principal is recoverable. Once the borrower defaults, the legal rate of 6% per annum (BSP Circular 799-2013) accrues from the date of judicial or extrajudicial demand under Article 2209, but pre-default interest is forfeited. The lesson: always put the agreed interest rate in the written loan agreement — in numbers and words to prevent ambiguity.

Can I file a criminal case for non-payment of a loan in the Philippines?

Generally no — non-payment of a loan is a purely civil matter in the Philippines. Article III, Section 20 of the Philippine Constitution prohibits imprisonment for non-payment of debt. The lender's remedy is a civil action for collection of sum of money before the Metropolitan/Municipal Trial Court (for amounts up to PHP 2,000,000 under RA 11576) or the Regional Trial Court (for higher amounts). However, two important exceptions trigger criminal liability: (1) if the borrower issued a check that bounced for insufficient funds or closed account, the lender may file a B.P. 22 case (Bouncing Checks Law) in addition to civil collection; and (2) if the borrower obtained the loan through deceit or false pretenses, estafa under Article 315 of the Revised Penal Code may apply. Mere refusal or inability to pay, by itself, is not a crime in the Philippines.

Should I require a co-maker or guarantor for a loan in the Philippines?

For any loan above modest amounts to a borrower whose financial standing is uncertain, requiring a co-maker (joint and several debtor) or a guarantor (solidary or subsidiary surety) is strongly recommended. Under Article 1216 of the Civil Code, when there are solidary debtors, the creditor may proceed against any one of them or against all simultaneously. Guarantee and suretyship are governed by Articles 2047 to 2084. A guarantor under Article 2047 is liable only after the principal debtor's assets have been exhausted (benefit of excussion under Article 2058), unless the guarantor expressly waives this defense and binds himself solidarily — in which case he becomes a surety, immediately liable. The Doxuno template includes optional guarantor/co-maker clauses that you can activate.

How do I enforce a loan agreement in the Philippines if the borrower does not pay?

After default, send a formal demand letter (registered mail with return card) to the Filipino borrower at his last known address — required by Article 1169 of the Civil Code to put the debtor in mora and start interest accrual. If the borrower fails to pay within the demand period, file a civil collection case before the Metropolitan/Municipal Trial Court (claims up to PHP 2,000,000 under RA 11576) or the Regional Trial Court (higher amounts) of the place where the lender or borrower resides. For loans up to PHP 1,000,000, you may use the Small Claims procedure under A.M. No. 08-8-7-SC, which is fast (resolution within 30 days), inexpensive, and lawyer-prohibited. For secured loans, foreclose the real estate mortgage extrajudicially under Act No. 3135 or judicially under Rule 68 of the Rules of Court, or the chattel mortgage under Act No. 1508. If a check bounced, file a B.P. 22 case before the prosecutor's office.

Does the Truth in Lending Act apply to private loans between individuals in the Philippines?

The Truth in Lending Act (Republic Act No. 3765) applies primarily to creditors who regularly extend credit — banks, financing companies, lending companies, retailers offering installment sales, and similar entities supervised by the BSP, SEC, or Insurance Commission. Casual private loans between individuals (e.g., a one-off loan between relatives or friends) are generally outside the strict regulatory framework, but it is still good practice to disclose the effective rate and total amount payable, as Philippine courts may consider non-disclosure when assessing whether interest is unconscionable. If you are operating as a lending business — making loans regularly to multiple borrowers — you must register as a lending company with the SEC under Republic Act No. 9474 (Lending Company Regulation Act of 2007); unregistered lending operations are punishable by fine and imprisonment.

How does the prescriptive period work for collecting a Philippine loan?

Under Article 1144 of the Civil Code of the Philippines, an action upon a written contract — including a written loan agreement — must be brought within ten (10) years from the time the right of action accrues. The clock starts running from the maturity date of the loan or, in case of installment loans, from the default of each installment. Article 1155 provides that the prescriptive period is interrupted (1) when the action is filed before the court; (2) by written extrajudicial demand by the creditor; (3) by any written acknowledgment of the debt by the debtor. Always send a written demand letter by registered mail with return card to the Filipino borrower's last known address — this both satisfies Article 1169 (mora) and interrupts prescription under Article 1155. For unwritten loans (rare for amounts above PHP 500 due to the Statute of Frauds in Article 1403), the period is six (6) years under Article 1145.

Legal & FinancePH

Free Loan Agreement Template — Philippines

Document a personal or business loan under Philippine law in just a few minutes. The Doxuno loan agreement template covers everything required by Articles 1933 to 1961 of the Civil Code of the Philippines (Republic Act No. 386) — principal, written interest stipulation per Article 1956, repayment schedule, security or real estate mortgage, default and acceleration, attorney's fees, and venue. Compatible with the Bangko Sentral ng Pilipinas (BSP) 6% legal interest rate under Circular 799-2013 and the Truth in Lending Act (RA 3765). Download a professional PDF ready for the Philippine lender and borrower to sign and notarize.

Create Your Loan Agreement

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LOAN AGREEMENT

Pursuant To The Civil Code Of The Philippines (RA 386) Articles 1933–1961

LENDER

Bayan Capital Lending Corp.

12F Net Park Building, 5th Avenue, Bonifacio Global City, Taguig 1634 · SEC: CS201234567

By: Maria Cristina Reyes, President

BORROWER

Juan Carlos dela Cruz

Unit 1205 The Trion Tower, McKinley Hill, Taguig 1634 · PhilSys: 0000-1234-5678-9012

Date: April 25, 2026 · Taguig City

Principal: PHP 500,000.00 · Rate: 6% p.a.

This Loan Agreement (the "Agreement") is entered into as of April 25, 2026, in Taguig City, Republic of the Philippines, by and between Bayan Capital Lending Corp. ("Lender") and Juan Carlos dela Cruz ("Borrower"). The parties, having the legal capacity to contract under Civil Code Art. 1318 (consent, object, cause), agree as follows:

LOAN

Subject to the terms and conditions of this Agreement, the Lender agrees to lend, and the Borrower agrees to borrow, the principal sum of Philippine Pesos PHP 500,000.00 (the "Loan"). The Loan shall be disbursed by the Lender to the Borrower on or about May 1, 2026 (the "Disbursement Date") by bank transfer to a deposit account designated by the Borrower. Upon disbursement, the Borrower acquires ownership of the loan proceeds and is bound to pay the Lender an equal amount of the same kind and quality, in accordance with Civil Code Article 1933 (mutuum).

INTEREST (CIVIL CODE ART. 1956 — IN WRITING)

The Loan shall bear interest at the rate of 6% per annum, calculated on the outstanding principal balance from the Disbursement Date. Interest shall be calculated on a daily basis (actual/365 convention). This stipulation of interest is in writing in accordance with Civil Code Article 1956, which provides that "no interest shall be due unless it has been expressly stipulated in writing." The legal rate of interest under Article 2209 read with BSP Circular No. 799 (s. 2013) is six percent (6%) per annum. Interest shall be included in each monthly instalment under clause 3 below.

REPAYMENT SCHEDULE

The Borrower shall repay the Loan in 12 equal monthly instalments of PHP 43,420.00 each, commencing one (1) calendar month from the Disbursement Date and continuing on the same day of each subsequent month. The final instalment shall include all remaining principal and accrued interest. If a payment date falls on a Saturday, Sunday, or holiday, payment is due on the next preceding business day. Time is of the essence in respect of all repayment obligations.

LATE PAYMENT INTEREST AND PENALTY

If the Borrower fails to make any payment when due, the Borrower shall pay interest on the overdue amount at the rate of 12% per annum, calculated from the due date until actual payment, in addition to the regular interest in clause 2. This rate is supplementary to the legal rate of six percent (6%) per annum under Civil Code Article 2209 and BSP Circular No. 799 (s. 2013). Default interest shall accrue continuously until full settlement and shall be without prejudice to acceleration and other remedies of the Lender.

PREPAYMENT

The Borrower may, at any time, prepay the whole or part of the outstanding Loan without premium or penalty, provided that: (a) the Borrower gives the Lender not less than five (5) calendar days' prior written notice; and (b) each prepayment is accompanied by all accrued interest up to the date of prepayment. Partial prepayments shall reduce subsequent instalments on a pro-rata basis unless otherwise agreed in writing.

EVENTS OF DEFAULT AND ACCELERATION

Each of the following shall constitute an Event of Default: (a) failure to pay any amount due under this Agreement within five (5) calendar days of the due date; (b) breach of any other material provision of this Agreement that is not cured within fifteen (15) days of written notice; (c) the Borrower's insolvency or filing of any petition under the Financial Rehabilitation and Insolvency Act (FRIA, RA 10142); (d) any material misrepresentation; or (e) cross-default on any other material indebtedness exceeding PHP 100,000. Upon an Event of Default, the Lender may, by written notice, declare the entire outstanding principal and accrued interest immediately due and payable, in addition to all other remedies available at law or under this Agreement.

USE OF FUNDS

The Borrower undertakes to use the Loan proceeds solely for the personal purpose agreed between the parties and not for any unlawful purpose. The Borrower confirms that this is a private loan between individuals/entities and is not a regulated lending or financing transaction requiring SEC authority under the Lending Company Regulation Act (RA 9474) or the Financing Company Act (RA 8556).

GUARANTY/SURETYSHIP

Roberto Manuel Santos, of Block 25 Lot 14, Acropolis Subdivision, Quezon City 1110 (ID: 0000-3456-7890-1234) (the "Guarantor"), hereby unconditionally and irrevocably guarantees, as solidary surety and not merely as guarantor, the due and punctual payment and performance by the Borrower of all obligations under this Agreement, in accordance with Civil Code Articles 2047 to 2057. The Guarantor's liability shall be joint and several (solidary) with the Borrower; the Lender may proceed directly against the Guarantor without first exhausting the Borrower's property or pursuing other remedies (Art. 2059). The Guarantor expressly waives the benefit of excussion under Article 2058 NCC. This guaranty shall remain in full force until all sums owing have been paid in full.

COSTS, EXPENSES, AND ATTORNEY'S FEES

In case of default and any action or proceeding to enforce this Agreement, the Borrower agrees to pay all costs of collection including attorney's fees equivalent to twenty-five percent (25%) of the total amount due (but not less than PHP 50,000), expressly stipulated under Civil Code Article 2208 (1) and (8), plus all litigation expenses, sheriff's fees, and other costs of suit. These fees are due in addition to any judgment or award.

10.

TAXES AND DOCUMENTARY STAMPS

The Borrower shall pay any documentary stamp tax (DST) due on this Agreement under the National Internal Revenue Code (RA 8424, as amended), particularly Section 179 (DST on debt instruments — PHP 1.50 for every PHP 200 of the issue price, payable to the Bureau of Internal Revenue). The Borrower shall further bear all costs of stamping and registration where applicable.

11.

ELECTRONIC EXECUTION

This Agreement may be executed electronically. Electronic signatures and electronic documents are valid and enforceable under the Electronic Commerce Act of 2000 (Republic Act No. 8792), particularly Sections 7 (legal recognition of electronic documents) and 8 (legal recognition of electronic signatures), and the Rules on Electronic Evidence (A.M. No. 01-7-01-SC). Note: Electronic execution does not satisfy the public-instrument requirement of Civil Code Art. 1358 for transactions involving real property; a notarized hard copy is required for any REM annexed hereto.

12.

GOVERNING LAW AND VENUE

This Agreement is governed by and construed in accordance with the laws of the Republic of the Philippines. The parties irrevocably submit to the exclusive jurisdiction of the Regional Trial Court of Taguig City for any dispute arising out of or in connection with this Agreement, in accordance with Rule 4 Section 4 of the 1997 Rules of Civil Procedure. For claims of PHP 1,000,000.00 or below, the matter may be referred to the Small Claims Court under A.M. No. 08-8-7-SC. Disputes among parties residing in the same city/municipality are first subject to Barangay Conciliation under Section 412 of RA 7160 (Local Government Code), where applicable.

13.

GENERAL PROVISIONS

Entire Agreement: This Agreement constitutes the entire agreement between the parties and supersedes all prior negotiations and understandings. Amendment: No amendment is effective unless in writing and signed by both parties (Civil Code Art. 1356). Severability: If any provision is held invalid or unenforceable, the remaining provisions remain in full force. Waiver: No waiver of any breach shall constitute a waiver of any future breach. Notices: All notices shall be in writing and delivered by hand, registered post, or email to the addresses set out above. Counterparts: This Agreement may be executed in counterparts, each constituting an original.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date first written above.

LENDER

Maria Cristina Reyes

President

Bayan Capital Lending Corp.

Date: ____________________

BORROWER

Juan Carlos dela Cruz

Date: ____________________

GUARANTOR/SURETY

Roberto Manuel Santos

Date: ____________________

ACKNOWLEDGMENT

BEFORE ME, a Notary Public for and in Taguig City, Metro Manila, on this April 25, 2026, personally appeared the parties named above, all known to me to be the same persons who executed the foregoing Loan Agreement and acknowledged that the same is their free and voluntary act and deed. Each party exhibited his/her competent evidence of identity in accordance with Rule II Sec. 12 of the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC).

Atty. Lourdes Mendoza
Notarial Commission No. 23-NCR-2025; valid until December 31, 2026; Roll of Attorneys No. 65432; IBP Lifetime Member No. 12345; PTR No. 9876543, January 3, 2026, Taguig City; MCLE Compliance No. VII-1234567

Doc. No. 124;
Page No. 26;
Book No. IV;
Series of 2026.

What is a loan agreement under Philippine law?

A loan agreement is a contract by which one party (the lender or "creditor") delivers money or other consumable goods to another (the borrower or "debtor"), who undertakes to return the same amount of the same kind and quality, generally with interest. Under Philippine law, the contract of loan ("mutuum") is regulated by Articles 1933 to 1961 of the Civil Code of the Philippines. Article 1933 distinguishes mutuum (simple loan) — where ownership of the money or fungible thing passes to the borrower — from commodatum, the gratuitous loan of a non-consumable thing where ownership remains with the lender. The loan agreement template here addresses mutuum, the standard form used by Filipino lenders, banks, lending companies, individuals, and businesses across the Philippines.

A Philippine loan agreement may be unsecured (a simple promise to pay) or secured by personal property (chattel mortgage under Act No. 1508), real property (real estate mortgage under Articles 2085-2123 of the Civil Code and Act No. 3135 on extrajudicial foreclosure), a guarantee, surety, or pledge. The agreement should expressly provide for the principal, the maturity date or installment schedule, the interest rate (in writing — see Article 1956), penalties for default (subject to Article 2227 reduction), attorney's fees in case of judicial collection, and the venue for legal action. When the loan is funded by a bouncing check, criminal liability under Batas Pambansa Bilang 22 (B.P. 22, the "Bouncing Checks Law") may attach in addition to civil liability.

Three principles dominate Philippine loan law and must be reflected in every well-drafted Philippine loan agreement. First, under Article 1956, "no interest shall be due unless it has been expressly stipulated in writing" — an oral interest agreement is unenforceable, and the lender may collect only the principal. Second, the legal rate of interest in the Philippines for loans and forbearances of money in the absence of stipulation is now 6% per annum under Bangko Sentral ng Pilipinas Circular No. 799 (Series of 2013), which took effect 1 July 2013 following the Supreme Court ruling in Nacar v. Gallery Frames (G.R. No. 189871, 13 August 2013). Third, while the Usury Law (Act No. 2655) has been effectively suspended by Central Bank Circular No. 905 (Series of 1982), Philippine courts retain the equitable power to reduce iniquitous, unconscionable, or excessive interest rates under Article 1229 in conjunction with Articles 19, 1306, and 1409 of the Civil Code (Spouses Castro v. Tan, G.R. No. 168940; Macalinao v. Bank of the Philippine Islands, G.R. No. 175490).

What this Philippine loan agreement covers

The Doxuno loan agreement generator produces a complete contract aligned with Articles 1933-1961 of the Civil Code of the Philippines, the Truth in Lending Act (RA 3765), and BSP regulations on interest rates.

Identification of lender and borrower

Full names, civil status, citizenship, TIN, and Philippine residence addresses

Principal amount and disbursement

Loan amount in Philippine Pesos (PHP), date of release, and method of disbursement

Interest rate (written stipulation)

Express interest stipulation in writing as required by Civil Code Article 1956

Repayment schedule

Lump sum at maturity, installment plan, or amortization with dates and amounts

Default and acceleration

Events of default and right of the lender to demand the entire balance immediately

Penalty interest clause

Additional rate on overdue amounts (subject to court reduction under Civil Code Art. 2227)

Real estate mortgage option

Secured loan under Civil Code Arts. 2085-2123 and Act No. 3135 on extrajudicial foreclosure

Chattel mortgage option

Movable security under Act No. 1508 — vehicles, equipment, inventory in the Philippines

Guarantor / surety provisions

Personal guarantee under Civil Code Arts. 2047-2084

Attorney's fees clause

Recoverable in case of judicial collection (Civil Code Art. 2208)

Venue and dispute resolution

Philippine court of competent jurisdiction and optional arbitration clause

Notarial acknowledgment

Acknowledgment before a Notary Public for evidentiary weight (2004 Rules on Notarial Practice)

How to create your Philippine loan agreement

No legal experience required. The Doxuno generator walks you through every section needed for a Philippine loan agreement and produces a professional PDF ready for the Filipino parties to sign and notarize.

1
Identify the lender and the borrower
Provide the full legal name, age, civil status, citizenship, Tax Identification Number (TIN), and current Philippine residence address of both the lender and the borrower. For corporate parties, indicate the corporate name, SEC registration number, principal office, and authorized representative under the appropriate board resolution. Complete identification ensures enforceability of the agreement throughout the Philippines and is essential for any subsequent collection action before Philippine courts.
2
State the principal and disbursement details
Specify the principal amount in Philippine Pesos (PHP), the date the loan is released, and the method of disbursement (cash, manager's check, bank transfer, deposit to the borrower's account at a Philippine bank). Best practice is to attach receipts or bank confirmation as evidence of actual delivery — under Article 1934, the loan is perfected only upon delivery (mutuum is a real contract). The agreement should expressly acknowledge receipt of the principal by the Filipino borrower to preempt later disputes over actual disbursement.
3
Stipulate interest in writing (Article 1956)
Civil Code Article 1956 of the Philippines is unequivocal: "No interest shall be due unless it has been expressly stipulated in writing." If the parties wish to charge interest, the rate (e.g., 1% per month, 12% per annum) must appear clearly in the written agreement. If no rate is stipulated in writing, no interest is recoverable, even if the parties agreed orally — only the legal rate of 6% per annum (BSP Circular 799-2013) accrues from default. Avoid unconscionable rates: although the Usury Law is suspended, Philippine courts may reduce iniquitous interest under Article 1229 (Spouses Castro v. Tan; Macalinao v. BPI). For consumer loans, also comply with the Truth in Lending Act (RA 3765) by disclosing the effective interest rate, finance charges, and total amount payable.
4
Set repayment, default, and security
Choose lump-sum payment at maturity or an installment schedule (monthly amortization is most common in the Philippines). Define events of default — non-payment of any installment, insolvency, sale of secured assets, false representations — and the lender's right to declare the entire balance immediately due and payable (acceleration). For larger loans, add security: a real estate mortgage (REM) over Philippine real property under Civil Code Articles 2085-2123 and Act No. 3135 (with the option of extrajudicial foreclosure); a chattel mortgage under Act No. 1508 over vehicles, equipment, or inventory; a personal guarantee under Articles 2047-2084; or a pledge of personal property. If the loan is backed by a postdated check, B.P. 22 criminal liability may attach for any bouncing check.
5
Include attorney's fees, venue, and notarize
Include an attorney's fees clause — typically 10% to 25% of the amount due — recoverable under Civil Code Article 2208 in case of judicial collection. Specify the venue: the Metropolitan/Municipal Trial Court for amounts up to PHP 2,000,000 (RA 11576 expanded jurisdiction effective 2021) or the Regional Trial Court for higher amounts, in the city or municipality where the lender or borrower resides. Optionally add an arbitration clause under the Alternative Dispute Resolution Act (RA 9285). Have both parties sign every page in the presence of a Notary Public commissioned in the Philippines and acknowledge the document under the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC) — notarization makes the loan agreement a public document with strong evidentiary weight in court.

Legal considerations for Philippine loans

A Philippine loan agreement engages multiple bodies of law: the Civil Code, the Truth in Lending Act, BSP regulations on interest, the Lending Company Regulation Act, the Bouncing Checks Law, and rules on real estate and chattel mortgage. Review the points below before lending or borrowing significant amounts.

This template is provided for informational purposes only and does not constitute legal advice. For loans of substantial value, secured loans, lending-company transactions, or where one of the parties is a financial institution, please consult a Philippine lawyer admitted to the Integrated Bar of the Philippines (IBP).

Reviewed by legal professionals. The clauses and statutory references in this Philippine loan agreement template have been reviewed against Articles 1933-1961 of the Civil Code, BSP Circular 799-2013, the Truth in Lending Act (RA 3765), and current Philippine case law on interest rate reduction.

Interest rate, BSP Circular 799, and unconscionable rates

The legal rate of interest in the Philippines for loans and forbearances of money, in the absence of express stipulation, is 6% per annum under Bangko Sentral ng Pilipinas Circular No. 799 (Series of 2013), effective 1 July 2013. This replaced the previous 12% rate set by Central Bank Circular No. 416 (1974) and was confirmed by the Supreme Court in Nacar v. Gallery Frames (G.R. No. 189871, 13 August 2013). The 6% rate also applies as the rate for judgments awarding sums of money. While the Usury Law (Act No. 2655) was effectively suspended by Central Bank Circular No. 905 (Series of 1982) — meaning parties may stipulate any rate by mutual agreement — Philippine courts retain the power under Article 1229 of the Civil Code, in conjunction with Articles 19, 1306, and 1409, to reduce interest rates that are "iniquitous, unconscionable, or excessive" as contrary to morals and public policy. The Supreme Court has reduced rates of 5%-7% per month (60%-84% per year) to 12% per annum (Spouses Castro v. Tan, G.R. No. 168940; Medel v. CA, G.R. No. 131622; Macalinao v. BPI, G.R. No. 175490). Penalty interest is separately governed by Article 2227 and may also be reduced if iniquitous.

Truth in Lending Act and Lending Company Regulation Act

The Truth in Lending Act (Republic Act No. 3765) requires Philippine creditors to furnish the borrower, before the consummation of any credit transaction, a written disclosure statement showing the amount financed, finance charges (interest, service fees, insurance), the effective annual interest rate, and the total amount payable. The Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), and Insurance Commission enforce the Act for institutions under their respective jurisdictions. Failure to comply gives the borrower a defense against collection of finance charges. Separately, lending companies — non-bank corporations engaged in granting loans from their own capital — are regulated by the Lending Company Regulation Act of 2007 (Republic Act No. 9474) and must register with the SEC; unregistered lending operations expose the operator to criminal penalties under Section 12 of RA 9474. Online lending applications ("OLAs") are subject to SEC Memorandum Circular No. 18 (Series of 2019) and recent SEC enforcement against unfair collection practices.

Security: real estate mortgage and chattel mortgage

A loan secured by Philippine real property is documented through a real estate mortgage (REM) under Articles 2085-2123 of the Civil Code, with extrajudicial foreclosure governed by Act No. 3135 (as amended by Act No. 4118) — the standard route to enforcement. Essential requisites of a valid mortgage (Article 2085): (1) it must secure a principal obligation; (2) the mortgagor must be the absolute owner; (3) the mortgagor must have free disposal of the property. The mortgage must be recorded with the Registry of Deeds of the place where the property is located to bind third parties (Article 2125). For movables, the chattel mortgage under Act No. 1508 covers vehicles, equipment, inventory, and machinery; it must be registered with the Registry of Chattel Mortgages and, for vehicles, with the Land Transportation Office (LTO). Pacto commissorio — automatic appropriation of the security by the creditor upon default — is void under Article 2088. Foreclosure must follow the procedure prescribed by law; the borrower has a one-year right of redemption from the date of registration of the certificate of sale (Section 6, Act 3135).

Bouncing Checks Law (B.P. 22) and venue of collection

When a Filipino borrower issues a postdated check to secure a loan that subsequently bounces for insufficient funds, closed account, or stop-payment without valid reason, the lender may pursue both civil collection of the loan and criminal prosecution under Batas Pambansa Bilang 22 (B.P. 22, the Bouncing Checks Law) — separate causes of action that may be pursued simultaneously. B.P. 22 imposes a penalty of imprisonment of up to one year, or a fine of up to double the amount of the check (with the Supreme Court favoring fines over imprisonment in Administrative Circulars 12-2000 and 13-2001), or both. For civil collection, the venue is set by Rule 4 of the Rules of Court: actions on contracts may be filed where the plaintiff or defendant resides at the option of the plaintiff. Republic Act No. 11576 (effective 2021) expanded the jurisdiction of the Metropolitan/Municipal Trial Courts to civil cases involving sums up to PHP 2,000,000 (and up to PHP 400,000 outside Metro Manila); the Regional Trial Court hears claims above those thresholds. Notarial acknowledgment is strongly recommended — a notarized loan agreement is a public document presumed authentic and enforceable.

Frequently Asked Questions

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Free Loan Agreement Template — Philippines

What is a loan agreement under Philippine law?

What this Philippine loan agreement covers

Identification of lender and borrower

Principal amount and disbursement

Interest rate (written stipulation)

Repayment schedule

Default and acceleration

Penalty interest clause

Real estate mortgage option

Chattel mortgage option

Guarantor / surety provisions

Attorney's fees clause

Venue and dispute resolution

Notarial acknowledgment

How to create your Philippine loan agreement

Identify the lender and the borrower

State the principal and disbursement details

Stipulate interest in writing (Article 1956)

Set repayment, default, and security

Include attorney's fees, venue, and notarize

Legal considerations for Philippine loans

Interest rate, BSP Circular 799, and unconscionable rates

Truth in Lending Act and Lending Company Regulation Act

Security: real estate mortgage and chattel mortgage

Bouncing Checks Law (B.P. 22) and venue of collection

Frequently Asked Questions

Is a loan agreement valid in the Philippines without notarization?

What is the maximum interest rate I can charge in the Philippines?

What happens if I lend money in the Philippines without a written interest stipulation?

Can I file a criminal case for non-payment of a loan in the Philippines?

Should I require a co-maker or guarantor for a loan in the Philippines?

How do I enforce a loan agreement in the Philippines if the borrower does not pay?

Does the Truth in Lending Act apply to private loans between individuals in the Philippines?

How does the prescriptive period work for collecting a Philippine loan?

Ready to formalize your Philippine loan?