Interest Accrual on a Private Loan after the Collector Stops Coming Around

Philippine legal perspective (as of 26 June 2025)

Key takeaway: In the Philippines, the mere fact that the person who used to pick up your payments has disappeared does not automatically halt the running of interest. Whether interest keeps piling up, stops, or is later disallowed by a court depends on (1) what your written loan contract says, (2) what the Civil Code and special banking rules provide, and (3) how both debtor and creditor behave after the collector’s “no-show” starts.

1 | Where does the duty to pay interest come from?

Source of obligation	Core rule	Practical effect
Contract (Civil Code art. 1956)	Interest must be expressly stipulated in writing.	If the written loan contract sets an interest rate, that rate governs until modified by law or court.
Law (arts. 2209, 2213)	When the debtor is in default, the court may impose “legal interest” as damages—currently 6 % p.a. unless the obligation is denominated in foreign currency or a special law applies (Nacar v. Gallery Frames, G.R. No. 189871, 2013).	Even if the contract is silent on interest, once default is proven, 6 % can be added from demand.
Judicial or extrajudicial demand	Default dates from the moment a valid demand is made, OR from the date fixed for payment if the loan is term-dated (art. 1169).	Interest in the nature of damages starts only upon demand/default, not before.

Usury Law note. Act No. 2655’s interest ceilings have been suspended (CB Circular 905-82). Parties may therefore agree on any rate unless a court later finds it “unconscionable” and reduces it.

2 | Who—or what—exactly is “the collector”?

Agent of the creditor. Most private-loan “collectors” are merely agents who receive payment on the creditor’s behalf. Civil Code arts. 1919, 1921 & 1241
Assignment/Factoring scenario. If the loan has been validly assigned or sold to a third party, payment must shift to the assignee once you receive formal notice (art. 1626).
Independent buyer of receivables. Some “collectors” buy the loan and step into the shoes of the lender; others only collect for a fee.

Why it matters: Payment made in good faith to a duly-authorized agent is payment that extinguishes the obligation (art. 1242). Payment to someone whose authority has lapsed or been revoked may be ineffective, leaving the debt (and interest) outstanding.

3 | Does interest automatically stop when the collector stops?

No. Interest keeps accruing—‐unless something in law or fact interrupts the running clock. Consider five decisive factors:

Interruption mechanism	Legal basis	When it applies	Effect on interest
Tender of payment followed by consignation	Arts. 1256–1261	Debtor tries to pay but creditor/collector refuses or cannot be found.	Interest stops on the date a valid tender is made if consignation in court (or a notary) follows without delay.
Mora accipiendi (creditor’s delay)	Art. 1169 ¶ 3	Creditor/agent unjustifiably refuses to accept payment.	Risk of loss shifts to creditor; interest after refusal can no longer be charged.
Express condonation or remission	Arts. 1270–1271	Creditor writes off interest (e.g., “No further interest from June 2025”).	Obligation to pay interest is extinguished in whole or in part.
Novation	Arts. 1291–1293	Parties agree on a new contract (e.g., rate cut, new schedule).	Old interest terms are replaced; accrual follows the revised terms.
Court declaration of unconscionability	Jurisprudence (e.g., Castro v. Tan, 2020; Macalinao v. BF Corp., 2018)	Rate is “shocking to conscience,” typically ≥36 % p.a. simple interest or double-digit monthly effective rate.	Court reduces rate (often to 12 % or 6 %); interest above the reduced rate is deemed void and may be applied to principal.

4 | Timeline mechanics—When does default arise?

Loan with a fixed maturity date. Default—and, therefore, interest as damages—begins the day after maturity even without demand (art. 1169 ¶ 1).
Loan “payable on demand” or payable in installments collected weekly/monthly. Default requires either
- written (or oral, if proven) demand from the creditor, or
- filing of a lawsuit. Interest by way of damages runs from that demand date or from filing, whichever occurs first (Nacar rule).

5 | Calculating interest after collector cessation

Step 1 – Confirm the interest clause.

Example: “Interest: 3 % per month on the unpaid balance, compounded monthly.”

Step 2 – Identify the date of default.

Fixed-term loan: date after maturity.
On-demand loan: date collector made last formal demand or date the creditor’s lawyer sent a notice or suit filing.

Step 3 – Test for any interruption.

Did the debtor make tender + consignation?
Was authority of the collector revoked, triggering creditor delay?
Has interest been condoned or novated?
Is the rate unconscionable (≥36 % simple p.a.)?

Step 4 – Apply proper rate.

Contractual rate until (a) full payment, (b) court reduces it, or (c) the obligation is merged into a judgment (thereafter 6 % p.a.).
No contractual rate / invalidated rate: 6 % p.a. simple interest as damages.

Step 5 – Decide on computation style.

Simple interest unless compounding is explicitly agreed upon.
If compound interest is agreed, Civil Code art. 1959 allows debtor to stop it by paying accrued simple interest.

6 | Effect of lawsuit or arbitration

Once the creditor sues:

Pre-judgment interest (either contractual or 6 %) runs only up to the date of decision.
Judgment interest then takes over at 6 % p.a. from decision until full satisfaction (Nacar doctrine).
Costs and attorney’s fees may be tacked on if bad faith or stipulation exists.

7 | Prescription and records

Item	Limitation period	Starting point
Action on a written contract (including interest)	10 years (Civil Code art. 1144)	From each missed installment’s due date, or from final maturity for lump-sum loans.
Action to enforce a foreign judgment	5 years (art. 1149)	Judgment date abroad, subject to recognition suit.
Action on unwritten loans	6 years (art. 1145)	From last payment or demand.

Good practice: Keep receipts, deposit slips, text messages, and notarized tenders. Courts look to concrete proof when deciding interest and default.

8 | Regulatory overlays worth noting

Bangko Sentral Circular 799-13 & 1098-21 → Legal interest at 6 % p.a.
Truth in Lending Act (R.A. 3765)—requires disclosure of effective interest rate and charges.
Fintech & lending-app rules (SEC Memorandum Circular 19-19)—harsh penalties for hidden or usurious charges; rates must be in APR form.
Consumer Act (R.A. 7394)—prohibits deceptive or unfair collection practices.

9 | Practical playbook

For borrowers

Demand proof of authority every time a new collector appears.
If collector vanishes, send a registered letter or email to the creditor offering payment; keep the registry receipt.
If no reply, consign the amount (plus interest up to tender date) with the proper RTC/MeTC clerk.
Check the rate. Anything over roughly 24 % p.a. effective simple may be attackable as unconscionable.
Seek restructuring before default snowballs. Courts look favorably on proactive debtors.

For creditors

Issue written revocation when a collector’s engagement ends; inform debtors.
Accept or formally reject tenders. Silence may put you in mora accipiendi.
Document computations—courts scrutinize interest figures.
Avoid oppressive charges; otherwise be ready for rate reduction and moral damages.

10 | Bottom-line scenarios

Situation	Interest fate
Debtor cannot find erstwhile collector, but makes no effort to locate creditor	Still accrues—debtor at fault.
Debtor tenders payment to creditor who refuses without cause	Stops accruing from tender; creditor in delay.
Debtor deposits money in court after refusal	No further interest from consignation date.
Contract rate is 5 % per month, suit filed, court calls it unconscionable	Court scales down to 12 % p.a. (or 6 %) from inception; any excess is applied to principal.
Creditor sues; judgment becomes final	6 % p.a. on the adjudged amount until paid.

Conclusion

In Philippine law, interest on a private loan is contract-driven but law-policed. A collector’s disappearance does not itself freeze interest; only legally significant events—tender plus consignation, creditor delay, condonation, novation, or a judicial rate-cut—can do that.

The safest path for a borrower unsure where to pay is to document a tender and, if rebuffed or ignored, consign. Conversely, a creditor should communicate clearly when agents change and accept reasonable tenders to avoid losing the right to further interest.

Disclaimer: This article is for information only and is not a substitute for specific legal advice. Always consult a Philippine lawyer for personal cases.