Short answer

Yes, a 9.5% per month rate (≈114% nominal p.a.; ≈197% effective p.a. if compounded monthly) can be stipulated between sophisticated parties—but Philippine courts may strike it down or reduce it as unconscionable if challenged. The Usury Law ceilings have long been suspended, yet the Civil Code gives courts power to curb iniquitous interest, penalties, and compounding. In practice, rates this high are routinely voided or cut back by jurisprudence—even in business-to-business settings.

The legal framework

1) Usury ceilings are suspended, not repealed

Act No. 2655 (Usury Law) once capped interest, but Central Bank Circular No. 905 (1982) suspended statutory ceilings. There is no fixed numeric cap today for most loans, including corporate loans.
Suspension ≠ free-for-all: freedom to stipulate rates is bounded by the Civil Code’s limits on unconscionability, public policy, and good customs (Civil Code arts. 1306, 1409, 1229, 2227), and by disclosure rules.

2) Interest must be in writing

Civil Code art. 1956: interest is not due unless expressly stipulated in writing. If there’s no valid written stipulation, only legal interest may apply.

3) Legal interest (when there is no valid stipulation, or as judicial rate)

Nacar v. Gallery Frames (2013) harmonized jurisprudence: the prevailing legal interest for loans and forbearance of money is 6% per annum (from 1 July 2013 onward). That 6% can operate:
- when there is no valid written stipulation;
- when a stipulated rate is voided (e.g., for unconscionability), courts often substitute legal interest.

4) Penalties, liquidated damages, and compounding

Penalty interest / charges are also subject to reduction if unconscionable (art. 1229).
Compound interest (interest-on-interest) generally requires express stipulation, and even then is constrained: art. 2212 allows interest on unpaid interest from judicial demand; pre-demand compounding is disfavored unless clearly agreed and still may be moderated.
Default interest and late charges can be simultaneously claimed only if the contract clearly allows it and the totals are not oppressive; otherwise courts pare them back.

5) Sectoral rules and consumer caps do not usually apply to corporates

Banks and financing/lending companies are governed by BSP/SEC prudential and disclosure rules (e.g., Truth in Lending Act, R.A. 3765; BSP disclosure circulars).
The SEC’s small-loan rate caps (2021) cover low-value, short-term consumer loans—not typical corporate borrowing. Corporate loans therefore have no numeric cap, returning us to the Civil Code’s unconscionability check.

What the courts do with very high rates

Even after the usury ceilings were suspended, the Supreme Court has consistently struck down or reduced exorbitant rates—often 3% to 6% per month—as unconscionable, replacing them with legal interest (or a reasonable annual rate). Illustrative lines from jurisprudence:

Medel v. Court of Appeals (1998): 5.5% per month held iniquitous; reduced.
Numerous cases thereafter (e.g., Castro v. Tan; Chua v. Timan; Spouses Tiongson line; Neri cases; Spouses Abella; Sps. Diongson; and many others) repeatedly voided 3%–6% per month as excessive, substituting 12% p.a. in earlier periods and 6% p.a. post-2013 per Nacar.
Courts also prune penalty interest (often set at another 3%–5% per month) and disallow double recoveries (e.g., charging both steep default interest and heavy penalties) when totals become punitive.

Key takeaway: In litigation, 9.5% per month is very likely to be cut back severely—even between corporations.

Why “9.5% per month” is a red flag

Magnitude:
- Nominal: 9.5% × 12 ≈ 114% p.a.
- Effective (monthly compounding): (1 + 0.095)^12 − 1 ≈ 197% p.a. Courts regularly deem far lower monthly rates oppressive.
Penalty stacking: If you add, say, 5% p.m. penalty on top of 9.5% p.m., total charges skyrocket—classic ground for judicial reduction under arts. 1229 & 2227.
Compounding: Automatic compounding without careful limits is often struck or trimmed—especially pre-demand.
Disclosure pitfalls: For supervised institutions, failure to make Truth-in-Lending–compliant disclosures (finance charge, APR/effective rate, total cost of credit) is a separate compliance risk.

Corporate borrower vs. consumer borrower

Corporates are presumed sophisticated and can negotiate pricing, covenants, and security. But that sophistication does not immunize the rate. Courts look at substantive fairness, not just form.
Consumer caps don’t generally protect corporations, but Civil Code moderation still applies.

Drafting and risk-management tips

For lenders

State the rate clearly in writing and show illustrative computations (nominal and effective).
Avoid extreme monthly rates; prefer p.a. pricing with defined compounding conventions.
Cap total charges: e.g., penalty interest ≤ 2% p.m., and a hard cap on aggregate default charges.
Separate ordinary interest from penalties and prohibit double-counting.
Conditioned compounding: if you must compound, (i) stipulate expressly; (ii) commence only from judicial demand or after stated triggers; (iii) set intervals and caps.
Representations & risk-based pricing memo: document commercial rationale (credit risk, tenor, collateral) to defend reasonableness if challenged.
Governance: Board or credit-committee minutes acknowledging the high-rate risk and the moderation exposure.

For corporate borrowers

Stress-test the waterfall: compute effective annual cost under likely default scenarios (late fees, penalty interest, compounding).
Negotiate fallbacks: if any component is judicially reduced, the parties agree on a substitute rate (e.g., 6% p.a. legal rate) rather than a re-trade of the whole deal.
Use caps and cure periods: short cure windows before penalties accrue; fee caps expressed in % of principal.
Watch cross-default: a punitive rate can cascade across facilities.
Arbitration/venue: consider Philippine seat so Nacar/Medel jurisprudence governs; a foreign seat may add cost/uncertainty.
Disclosure & board approvals: ensure internal approvals acknowledge the high APR to avoid fiduciary issues.

Litigation posture if you see 9.5% per month

Plead unconscionability (arts. 1306, 1409, 1229, 2227), citing post-usury case law voiding monthly rates as low as 3%–6%.
Ask for substitution with legal interest (6% p.a.) per Nacar from the relevant accrual points.
Attack penalty stacking as punitive and seek equitable reduction.
Challenge compounding absent tight stipulation and pre-demand accruals.
Truth-in-Lending angle (for covered lenders): disclosure defects can bolster equitable relief.
Accounting: present clear before/after computations showing how the total becomes confiscatory.

Worked example (indicative)

Principal: ₱10,000,000
Stipulated: 9.5% per month, compounded monthly
One-year cost if strictly enforced:
- Nominal: ~₱11.4M interest (114% p.a.)
- Effective: principal × ((1+0.095)^12 − 1) ≈ ₱19.7M interest (≈197% p.a.)
In court, the judge could void the 9.5% p.m., award 6% p.a. instead, and slash penalties—a swing of millions.

Bottom line

Legality to stipulate: Yes—no fixed statutory ceiling for corporate loans.
Enforceability at 9.5%/month: Very doubtful. Philippine courts have a sustained line of cases invalidating or reducing far lower monthly rates as unconscionable, often replacing them with 6% p.a. under Nacar and trimming penalties/compounding.
Best practice: Price annually, disclose clearly, keep penalties modest, cap aggregates, and assume a court may moderate anything that looks punitive.

This article provides general information on Philippine law and jurisprudence. It is not legal advice. For a live transaction or dispute, have counsel review your specific documents, timelines, and computations.