Recovering an unpaid loan in the Philippines is almost always a civil matter, not criminal, unless the borrower obtained the money through fraud or deceit (estafa) or issued a bouncing check (BP 22 or estafa under Art. 315(2)(d) RPC). The overwhelming majority of personal or informal loans fall under the Civil Code provisions on mutuum (simple loan) and are resolved through civil collection cases.

Below is a comprehensive, step-by-step guide on every available remedy, the correct procedure, timelines, costs, and practical strategies that actually work in Philippine courts as of December 2025.

1. Determine If Your Claim Is Still Enforceable (Prescription Period)

Before doing anything, check if the loan has prescribed (expired):

Written contract (promissory note, loan agreement): 10 years from the date the loan became due (Art. 1144, Civil Code).
No written contract (purely verbal loan): 6 years from the date of the loan or last demand (Art. 1145, Civil Code).
Loan payable on demand with no maturity date: 10 years from the date of the loan if written; the cause of action accrues from the moment you make a demand (Southeast Asia Shipping Corp. v. Seagull Maritime Corp., G.R. No. 176031, 2008).

If the borrower made a partial payment or written acknowledgment within the prescriptive period, the 10-year or 6-year period restarts from that date (Art. 1155, Civil Code).

2. Gather and Preserve All Evidence

Strong evidence wins collection cases. Collect:

Promissory note or loan agreement (original or notarized copy)
Proof of delivery of money (bank transfer receipts, manager’s checks, deposit slips, Gcash/PayMaya screenshots with full names)
Text messages, Viber, Messenger chats, or emails showing acknowledgment of the debt or promises to pay
Demand letter and proof of service (registry return card or personal service with affidavit)
Witness affidavits (if money was handed in person)
Audio/video recording (if admissible and you informed the other party, though rarely needed)

3. Send a Formal Demand Letter (Mandatory in Practice)

Although not strictly required by law for collection of sum of money, sending a notarized demand letter has three major benefits:

(a) It interrupts prescription if sent within the period.
(b) It makes the borrower liable for interest and attorney’s fees if you win (most promissory notes include this stipulation).
(c) Courts almost always require proof of demand before entertaining the case.

Use registered mail with return card + personal delivery if possible. Give 7–15 days to pay. Include computation of interest (if stipulated) and warning of legal action.

4. File the Correct Case in Court

A. Small Claims Court (Highly Recommended for Loans ≤ ₱1,000,000)

Maximum amount: ₱1,000,000 (as amended by OCA Circular No. 45-2024 effective April 1, 2024).
No lawyers allowed (except if the lawyer is the plaintiff himself/herself).
Filing fees: very low (₱4,000–₱12,000 depending on amount).
Hearing: only one (1) day; decision within 24 hours after.
Execution: immediate if no appeal (no appeal allowed in small claims).
Requirements: Statement of Claim (Judicial Affidavit format), promissory note, proof of lending, demand letter, barangay certificate (if parties reside in same city/municipality).

File in the Metropolitan Trial Court / Municipal Trial Court in Cities where the borrower resides or where the loan was executed (plaintiff’s choice).

Success rate is extremely high (>90%) if you have clear evidence.

B. Regular Civil Action for Collection of Sum of Money (for loans > ₱1,000,000 or if you want attorney’s fees higher than small claims limit)

File in Regional Trial Court if > ₱2,000,000 (Metro Manila) or > ₱1,000,000 (outside Metro Manila) per R.A. 11576 (July 30, 2021).
Below those amounts: MeTC/MTC/MTCC.
Requires mandatory judicial dispute resolution (JDR) before pre-trial.
Takes 1–3 years on average.

C. Summary Procedure (for loans ≤ ₱2,000,000 outside Metro Manila or ≤ ₱2,000,000 in Metro Manila if no complex issues)

Still faster than regular civil action.

5. Prior Barangay Conciliation (Lupong Tagapamayapa)

Required for money claims if both parties reside in the same city or municipality (except small claims cases where the plaintiff may choose to bypass it).
If the borrower does not appear or no settlement is reached, you get a Certificate to File Action within 15 days.

6. When Criminal Action Is Viable

Only in these specific situations:

Estafa through deceit (Art. 315(2)(a) RPC) – borrower used false pretenses to obtain the loan (e.g., fake title as collateral, misrepresented business).
Estafa through post-dated check (Art. 315(2)(d) RPC) – check was issued simultaneously with the loan and bounced.
B.P. Blg. 22 (Bouncing Checks Law) – purely for the bounced check itself, even without deceit.

Criminal cases are harder to prove (beyond reasonable doubt) and rarely result in actual money recovery (restitution is secondary). File them only if you want the borrower jailed or if you need leverage for settlement.

7. If the Loan Is Secured (Real Estate Mortgage or Pledge)

File foreclosure (judicial or extrajudicial under Act 3135 as amended by R.A. 11579).
Extrajudicial foreclosure is much faster (3–6 months) and cheaper.

8. Enforcement of Judgment

Once you have a final judgment:

File Motion for Execution (automatic after 15 days in small claims).
Sheriff will levy on bank accounts, vehicles, real property, or garnish salaries/shares.
You can also file an action for indirect contempt if the borrower hides assets.

9. Interest Rates and Attorney’s Fees You Can Recover

If stipulated in writing: enforce the agreed rate (even if >12% p.a. – usury is dead since CB Circular 905-1982).
If no stipulation: 6% per annum legal interest from date of judicial/extrajudicial demand (BSP Circular No. 799-2013, lowered from 12% to 6% effective July 1, 2013, but 12% until then).
Attorney’s fees: 10–25% is usually awarded if stipulated or if borrower acted in bad faith.

10. Practical Tips That Win Cases in 2025

Notarize the promissory note – gives it stronger evidentiary weight.
Always include a clause: “In case of suit, borrower agrees to pay 25% attorney’s fees plus costs.”
Use bank transfer or manager’s check – never cash without witnesses.
File in small claims whenever possible – fastest, cheapest, no lawyer needed.
If the borrower is abroad, file the civil case here; once you have judgment, you can enforce it abroad via the foreign court’s rules (or file here and ask for preliminary attachment on Philippine assets).
Never accept post-dated personal checks without strong evidence of the underlying loan – courts are strict on BP 22 knowledge requirement.

Conclusion

In the Philippines, recovering a loan is straightforward if you have a written contract, proof of lending, and you file promptly in small claims court. More than 95% of well-documented personal loans are recovered through small claims or regular collection suits. Act within the prescriptive period, document everything, and choose small claims whenever possible – it is the single most effective remedy for loans up to one million pesos as of 2025.