This guide is practical information—not legal advice. Laws, court rules, and thresholds change. When in doubt, consult a Philippine lawyer or your local clerk of court.

1) First Principles: What you actually have

Type of obligation. A personal loan is a simple loan (mutuum) under the Civil Code. The lender transfers money to the borrower, who must return an equivalent amount.
Interest. You cannot charge interest unless it’s expressly stipulated in writing (e.g., a promissory note, loan contract, or even written messages acknowledging an agreed interest). Without a written interest term, only the legal interest may apply once the debtor is in delay.
Default (mora). A debtor is generally in legal delay after a demand (judicial or written extrajudicial), unless the loan has a fixed due date or falls under exceptions where demand isn’t necessary.
Reasonableness of interest/penalties. While contractual freedom is broad, courts reduce unconscionable interest, penalty, or attorney’s fees.

2) Build Your Case File (before you demand)

Create a neat folder—physical or digital—with:

Proof of the loan
- Promissory note, IOU, loan contract, bank/GCash transfers, deposit slips, receipts.
- Screenshots/exports of chats, texts, emails showing the loan, amount, due date, and any terms.
Proof you asked to be paid
- Prior messages requesting payment and the borrower’s responses.
Borrower’s full identity and reachable addresses
- Full name, mobile, email, workplace, home address, known bank or e-wallet details, and any co-makers/guarantors.
Computations (clear and conservative)
- Principal, interest (if written), penalties (if written), and a legal interest line you’ll claim from date of default if no interest was agreed in writing.
Possible witnesses
- Anyone present during the loan or who saw admissions of debt.

Tip: Philippine courts recognize electronic documents and messages if properly presented and authenticated. Keep original files and metadata where possible.

3) Send a Formal Demand Letter

A well-crafted demand letter is often enough—many debtors pay when they see you’re organized.

What to include

Parties’ names and addresses.
Amount owed (principal + contract interest/penalties if any) and your clean computation.
Basis of the debt (date loaned, due date, agreed terms).
A clear deadline (e.g., “within 10 calendar days from receipt”).
Where/how to pay (bank details, e-wallet, or in-person).
A firm but civil statement that you’ll pursue legal remedies (barangay conciliation, small claims/ordinary suit, and enforcement) if unpaid.
Attach copies of key proof.
Send by registered mail, courier with proof of delivery, or personal service with an acknowledgment. Keep receipts and tracking.

Notarization isn’t required, but it can help establish execution and regularity.

4) Barangay Conciliation (Katarungang Pambarangay)

Before filing many civil cases, Philippine law requires parties who live in the same city/municipality to undergo barangay conciliation, unless an exception applies (e.g., parties live in different cities/municipalities; one party is a corporation; there’s urgency for provisional relief; or other recognized exceptions).

Process overview

Go to the Punong Barangay of the debtor’s barangay (or where the cause of action arose) and file a complaint.
Mediation/conciliation is scheduled. If settlement is reached, the Kasunduan (compromise) is enforceable.
If no settlement, the barangay issues a Certificate to File Action. You’ll need this to file in court (when required).

Bring your case file and be prepared to offer or evaluate a structured payment plan if appropriate.

5) Choosing the Proper Case: Small Claims vs Ordinary Civil Action

A) Small Claims Case

Best for: Straightforward money claims (loan, debt, service/contract amounts) up to the current small-claims monetary cap (exclusive of interest, damages, and attorney’s fees).
Fast & simplified: Paper-based, no lawyers may appear for natural persons (you can consult one outside court).
Forms: Verified Statement of Claim and court-provided templates; attach your evidence (contracts, chats, receipts, demand letter, barangay certificate if required).
Hearing: Summary—usually resolved quickly.
Relief: Money judgment for the amount due plus allowable interest and costs.

The monetary cap for small claims has been raised several times in recent years. Check the latest figure with the Supreme Court’s rules or the clerk of court before filing.

B) Ordinary Civil Action for Sum of Money

Use when: Your claim exceeds the small-claims cap or the issues are complex.
Where to file (jurisdiction):
- Metropolitan/Municipal Trial Courts (MeTC/MTC/MTCC): For claims not exceeding ₱2,000,000 (exclusive of interest, damages, attorney’s fees, and costs).
- Regional Trial Courts (RTC): Above ₱2,000,000.
Venue: In money claims, file where plaintiff or defendant resides (venue rules differ for real property or special cases).
Procedure: Regular rules apply—pleadings, pre-trial, court-annexed mediation/JDR, trial, judgment.

6) Criminal Complaints Sometimes Used Alongside Civil Remedies (Handle with Care)

Nonpayment of a loan by itself is not a crime.

Estafa (Swindling). Possible only if there was fraud or deceit at the time of borrowing (e.g., using false pretenses or misappropriating money received in trust). It’s not estafa if the borrower merely failed to pay a plain loan without deceit at inception.
B.P. Blg. 22 (Bouncing Checks). If the debtor issued a check for the loan and it bounced, a B.P. 22 complaint may be viable (with notice of dishonor and other elements). This is separate from estafa and from your civil claim.

Criminal filings are serious and can backfire if elements aren’t met. Get legal advice before filing.

7) Interest, Penalties, and Sample Computations

If there’s a written interest term

Compute contract rate per the written agreement from the agreed start date (e.g., date of availment or due date), and apply any penalty clause strictly as written (courts may reduce unconscionable rates).
Add legal interest (generally 6% per annum in Philippine jurisprudence for loans/forbearance) from default only if and where applicable, such as in the absence of a valid contractual rate covering the same period, or from finality of judgment on the total amount due.

If no written interest

You normally can’t charge contractual interest.
You may claim legal interest (commonly 6% p.a.) from date of default (e.g., receipt of your demand letter) until fully paid; and legal interest on the judgment amount from finality of judgment until satisfaction.

Example (no written interest):

Principal: ₱100,000
Demand received: 1 March 2025
Payment/Judgment satisfaction: 1 September 2025
Legal interest ≈ ₱100,000 × 6% × (184/365) ≈ ₱3,027.40

Courts may vary the reckoning points based on the facts and controlling jurisprudence.

8) Filing Your Case: Practical Steps & Checklists

Before filing

Finalize clean computations (principal, interest, penalties).
Assemble a single, paginated Evidence Packet with an index.
Send a final demand with a short window (e.g., 5–10 days), unless it’s already been given recently.
Assess jurisdiction (small claims vs MTC vs RTC) and venue.
If required, complete barangay conciliation and get a Certificate to File Action.

Filing small claims

Fill out the Verified Statement of Claim and court forms.
Attach all evidence (copies—bring originals to the hearing).
Pay filing fees or apply for indigency if qualified.
Ask the clerk about service of summons and schedule.
Prepare a one-page narrative you can read at hearing + your computations.

Filing an ordinary civil action

Prepare the Complaint (facts, cause of action, prayer; verify when required).
Include Certificate of Non-Forum Shopping.
Attach annexes (contracts, messages, demand, barangay certificate).
Pay fees; monitor issuance and service of summons (personal, substituted, or with court leave, electronic/other modern modes).
Be ready for Court-Annexed Mediation and Judicial Dispute Resolution.

9) Settlement Options That Actually Work

Structured payment plan with clear milestones, modest interest, and an acceleration clause on default.
Collateral-backed agreement (e.g., pledge of a valuable item)—documented and, if necessary, notarized.
Co-maker/guarantor who signs a written undertaking.
Court-approved compromise (has the effect of judgment).
Post-dated checks (know the risks and obligations that come with them).

Always document everything in writing and exchange official receipts upon payment.

10) After You Win: Enforcement (Execution)

A judgment doesn’t collect itself—plan for enforcement:

Writ of Execution. After judgment becomes final (or immediately if judgment is provisionally executory under applicable rules), apply for a writ.
Sheriff’s options:
- Garnish bank accounts/e-wallets (if you can identify them).
- Levy on personal property (vehicles, devices, valuables) and, if necessary, levy on real property (subject to procedures and exemptions).
- Garnish receivables (e.g., money owed to your debtor by others).
Employment income. Certain portions of wages/salaries may be protected or limited by law. Sheriffs follow statutory exemptions and ceilings—ask the court/sheriff what’s permissible.
Post-judgment interest. Legal interest generally runs from finality of judgment until full satisfaction.
Settlement during execution. If the debtor starts paying, always issue receipts and promptly inform the court when fully satisfied.

11) Avoid Illegal or Counterproductive Tactics

No public shaming/doxxing. Defamation and data-privacy laws can bite back.
No harassment or threats. Keep communication professional; let the demand letter speak for you.
No illegal “collateral repossession.” Don’t seize property without due process unless you have a lawful right (e.g., pledged item under a documented pledge and procedures are followed).
No fake legal papers. Only use authentic, filed, or notarized documents.

12) Smart Prevention for Next Time

Use a written promissory note with: principal, written interest rate, due date, payment schedule, penalty, acceleration, place of payment, and debtor’s full ID details.
Keep KYC-type info (IDs, home/work addresses, alternate contacts).
Get a co-maker or collateral for larger loans.
Issue receipts for every payment and maintain a ledger.
Agree on venue and costs (where allowed).
Consider notarization for evidentiary weight.

13) Quick Decision Tree

Do you both live in the same city/municipality?
- Yes: Try barangay conciliation first (unless an exception applies).
- No: You may file in court directly.
How much is owed (exclusive of interest/damages)?
- Within small-claims cap: File Small Claims.
- Over cap but ≤ ₱2,000,000: File in MTC.
- Over ₱2,000,000: File in RTC.
Evidence ready?
- Yes: Demand letter → (Barangay if required) → Case.
- No: Gather documents and get written acknowledgment from debtor if possible (also interrupts prescription).

14) Simple Demand Letter Template (Fill-in-the-blanks)

[Your Name]
[Address / Email / Mobile]

[Date]

[Debtor’s Name]
[Address / Email]

RE: DEMAND FOR PAYMENT – [₱_____ Loan dated ______________]

Dear [Mr./Ms. Lastname]:

On [date], I lent you ₱[amount], due on [due date], as evidenced by [promissory note / bank transfer / messages], copies attached. As of today, the amount of ₱[principal] remains unpaid.

[If there is written interest:] Under our written agreement, interest accrues at [__% per annum/month] from [start date]. As of [cutoff date], accrued interest/penalties total ₱[amount]. A computation is attached.

[If no written interest:] Legal interest will be pursued from the date of your default.

Please pay ₱[total due] within **10 calendar days from receipt** of this letter, via [bank/e-wallet details], or arrange payment with me within the same period. Otherwise, I will pursue legal remedies, including barangay conciliation and filing a small-claims/ordinary civil action, plus allowable interest and costs.

This is without prejudice to other rights and remedies.

Sincerely,

[Signature]
[Printed Name]

15) Frequently Asked Questions

Q: Can I charge any interest I want if it’s written? A: You can agree on interest, but courts reduce unconscionable rates and excessive penalties.

Q: Will notarizing the promissory note guarantee I win? A: Notarization improves evidentiary weight, but you still need to prove the debt and amount due.

Q: The debtor admitted the debt in chat—enough? A: Often, yes—especially combined with proof of transfer. Preserve originals and metadata.

Q: What stops the debtor from dodging service of summons? A: Courts allow substituted service and, with leave, modern service modes. Persistence matters.

Q: Can I immediately garnish their salary? A: Only after you obtain a judgment and a writ of execution, and subject to legal exemptions/limitations.

16) Final Pointers

Be organized, civil, and persistent.
Keep your communications professional and documented.
Choose the right forum (barangay/small claims/MTC/RTC).
Understand that the endgame is enforcement—identify assets early.
When possible, settle smart, get it in writing, and move on.

If you want, I can turn your documents (chats, receipts, transfers) into a ready-to-file small-claims packet and tailor a demand letter using your facts.