Promissory Note Template for Personal Loans in the Philippines

Everything you need to know – legal foundations, drafting guidance, and a ready-to-use specimen

1. What is a Promissory Note?

A promissory note (PN) is a written, unconditional promise by one party (the maker or promissor) to pay a determinate sum of money to another (the payee or promisee) either on demand or at a fixed or determinable future date. In Philippine practice, it is both a contract (governed chiefly by the Civil Code on obligations and contracts) and a negotiable instrument (Title I, Negotiable Instruments Law [Act No. 2031]).

Key distinction: • Loan contract = creates the credit. • Promissory note = evidence and “paper” embodying the debt, making transfer, discounting or suit easier.

2. Governing Laws & Regulations

Statute / Rule	Salient Provisions Relevant to PNs
Civil Code (Books III & IV)	Articles 1156 – 1422 (obligations & contracts); Art. 1953 et seq. (simple loans)
Negotiable Instruments Law (NIL)	Secs. 1-13: form & requisites; Secs. 14-42: transfer, indorsement, defenses
Bangko Sentral ng Pilipinas (BSP) Circular No. 799	Sets maximum interest for banks and lending/financing companies after usury law suspension
Truth in Lending Act (RA 3765) & BSP Circular No. 730	Mandatory disclosure of finance charges in credit transactions
NIRC (Sec. 179) & BIR Rev. Regs. No. 9-2021	Documentary Stamp Tax (DST) on loan instruments (₱0.75 per ₱200 of principal)
E-Commerce Act (RA 8792) & Electronic Signatures Regulations	Validity of electronic PNs and e-signatures
Personal Property Security Act (RA 11057)	If PN is secured by chattel mortgage or security interest
Data Privacy Act (RA 10173)	Collection and processing of borrower data

3. Essential Elements (Form Requirements)

Under Sec. 1, NIL and prevailing jurisprudence:

Written & Signed by the maker (pen-and-ink or qualified e-signature).
Unconditional promise to pay (no “subject to” conditions).
Sum certain in money (amount + lawful currency).
Payable on demand or at a fixed/fixed-determinable date.
Payable to order or bearer.
Delivered to the payee.

Tip: For consumer-loan PNs, make them non-negotiable (insert “non-negotiable” conspicuously) to avoid unintended transfer.

4. Typical Clauses & Best-Practice Drafting Tips

Clause	Purpose	Drafting Notes
Principal & Interest	States amount and rate	Put APR & pesos in words. Check BSP cap (no formal ceiling, but > 36-48 % p.a. often struck down as unconscionable).
Repayment Schedule	Sets due dates	Use Amortization Table as annex. Add grace periods & late-payment order of application (interest → penalties → principal).
Acceleration / Default	Allows entire balance to become due	Tie to enumerated events of default; give 3-5-day cure period for consumer fairness.
Late-Payment Interest / Penalties	Deters delinquency	Cumulative penalty > 2-3 % p.m. may be voided; distinguish from regular interest.
Attorney’s Fees & Costs	Recover collection expenses	Set a liquidated amount or percentage (10 %); courts reduce “unreasonable” fees.
Security / Collateral	Indicates separate chattel mortgage, REM, or personal property security agreement	Reference registration details in PPSR or Registry of Deeds.
Set-off	Allows lender to debit linked accounts	Require borrower’s consent in writing; coordinate with bank secrecy law.
Governing Law & Venue	Avoids forum shopping	Most choose Makati, Taguig, QC, Cebu, Davao courts.
Waivers & Consents	e.g., notice waivers, confidentiality consents	Waivers of future fraud/gross negligence invalid; keep within lawful bounds.
Notarial Acknowledgment	Converts into a public document admissible in court	Maker must appear before notary with competent ID; attach documentary stamps first.
Data Privacy Consent	Lender’s right to report to credit bureaus	Cite CIC (Credit Information Corporation) Act and data subject rights.

5. Notarization, Stamp Taxes, and Registration

Notarization is not required for validity between the parties, but:
- Makes the PN self-authenticating in court.
- Required if the PN is part of a chattel mortgage package.
Documentary Stamp Tax (DST):
- Affix PHP 0.75 for every PHP 200 or fraction of face value.
- File BIR Form 2000 and pay within 5 days after the month of issuance.
Registration:
- A standalone PN need not be registered.
- If secured, register the security instrument (not the PN) with PPSR or Registry of Deeds/LTO.

6. Interest-Rate Limits & Usury Concerns

Usury Law (Act 2655) ceilings are suspended by CB Circular 905 (1982).
Courts, however, strike down interest “unconscionable” under Art. 1229 Civil Code & jurisprudence (e.g., Spouses Abella v. CA, Macalinao v. Bank of PI).
Judicially acceptable retail-loan range: 12 % – 36 % p.a.; anything beyond risks reduction by court.

7. Enforcement & Prescription

Scenario	Limitation Period	Basis
PN payable on demand	10 years from date of demand	Art. 1144 Civil Code & Philippine National Bank v. Survivor
PN with fixed maturity	10 years from maturity date	Art. 1144 Civil Code
Action vs. indorser (negotiable PN)	1 year from notice of dishonor	Sec. 192 NIL
PN secured by mortgage	10 years to foreclose; but real-action prescription rules apply if real property	Art. 1142 / 1134 /

Acceleration clause effect: Once invoked, whole balance’s maturity advances and prescription runs from acceleration notice.

8. Transfer, Assignment, and Negotiability

Negotiable PN may be indorsed and transferred, enabling discounting with banks or rediscounting at BSP.
An assignment of a non-negotiable PN must comply with Art. 1624 Civil Code; assignee takes subject to personal defenses.
In consumer lending, marking “NON-NEGOTIABLE” protects borrowers against holders in due course.

9. Electronic Promissory Notes

RA 8792 recognizes electronic documents and electronic signatures as functional equivalents.
To be negotiable, the electronic PN must satisfy NIL requisites and be capable of “control” per UNCITRAL’s Model Law on Transferable Records (not yet expressly adopted, but BSP allows e-notes under Open Finance).
Practical route: use an e-signed PDF, then retain original in secure server with audit logs.

10. Consumer Protection & Disclosure Rules

RA 3765 + BSP Circular 730: lender must disclose finance charges, net proceeds, APR, and total payments before execution.
Failure can void interest or delay enforceability.
Debt Collection: Appendix Q, MORB and BSP Circular 1164 prohibit harassment, threats, or unfair practices by collection agents.

11. Specimen Template (Individual Borrower)

DISCLAIMER: Sample only—customise for your facts; seek counsel. Portions in [brackets] are variables.

PROMISSORY NOTE (Personal Loan) (Non-Negotiable)

₱[Amount in figures] [City], Philippines Date: [DD Month YYYY]

FOR VALUE RECEIVED, I, [Full Name of Borrower], of legal age, Filipino, residing at [Address] (“Maker”), hereby unconditionally promise to pay to the order of [Lender’s Legal Name] (“Payee”) the principal amount of PESOS: [Amount in words] (₱[figures]), together with interest thereon at the rate of [rate] % per annum computed on the outstanding balance, payable as follows:

Term & Installments. The loan shall be repaid in [number] equal monthly installments of ₱[amount] each, due every [due date] commencing on [first due date] until [maturity date].
Late Payment Charge. Any installment not paid within [x] days from due date shall incur a late-payment interest of [penalty rate] % per month until fully paid.
Acceleration. Upon (a) failure to pay any amount when due, (b) breach of any obligation herein, or (c) commencement of insolvency proceedings against the Maker, the entire unpaid balance, plus accrued interest and penalties, shall become immediately due and demandable without notice.
Prepayment. Maker may prepay all or part of the loan without penalty, provided interest shall be computed only up to actual date of payment.
Attorney’s Fees & Costs. In case of collection through counsel or court action, Maker agrees to pay ten percent (10 %) of the total amount due as attorney’s fees, plus costs of suit.
Governing Law & Venue. This Note shall be governed by Philippine law. Exclusive venue of actions arising here-from shall be the proper courts of [City].
Consent to Data Processing & Credit Reporting. Maker consents to the processing of personal data and reporting of credit information to the Credit Information Corporation and accredited bureaus in accordance with RA 10173 and RA 9510.

IN WITNESS WHEREOF, I have hereunto set my hand this [date] at [place].

_____________________________ [Name of Maker] Tax Identification No.: ________

ACKNOWLEDGMENT [Standard notarial block pursuant to 2004 Rules on Notarial Practice]

12. Practical Checklist Before Issuance

Identify the parties – exact legal name, TIN, govt-issued ID.
Verify capacity – if married, check conjugal consent (Art. 124, FC).
Compute DST and affix stamps before notarization.
Attach repayment schedule and disclosure statement.
Secure collateral documents (chattel mortgage, REM, PPSA notice).
Collect signed consent forms for credit information & data privacy.
File Disclosure Statement with borrower copy (RA 3765).
Keep original PN in fireproof or digitized vault; issue borrower a stamped duplicate.

13. Common Pitfalls & How to Avoid Them

Pitfall	Consequence	Prevention
Interest clause silent on method (simple vs. compounding)	Courts default to simple interest; lender loses yield	State “simple interest” or “compounded monthly”.
Penalty rate + regular rate exceed 3 % p.m.	May be reduced as unconscionable	Cap total effective charge; separate interest vs. penalty.
Failure to stamp within 5 days	DST surcharge & compromise penalty; instrument inadmissible	Calendar BIR filing; use eDST if bank.
No written demand before suit on demand PN	Premature filing; case dismissed	Serve demand letter and retain proof of receipt.
Using “bearer” PN for retail consumer	Risk of scalpers/harassment	Mark non-negotiable; specify payee.
Electronic PN with basic e-sign but no audit trail	Authenticity challenges	Employ PKI-based digital signature or e-signature service with LTV logs.

14. Frequently Asked Questions (FAQs)

Q1: Is notarization mandatory? No. A PN is valid between parties once delivered. Notarization is advisable for evidentiary strength and if to be annotated with a mortgage.

Q2: Can I hand-write the PN? Yes, though typewritten forms ensure legibility. Handwritten notes still meet NIL’s “written” requirement.

Q3: May I charge “service fees” on top of interest? Permitted if clearly disclosed (RA 3765). Courts may treat hidden charges as interest for usury review.

Q4: What if borrower loses the original PN? Indorse a Lost PN Affidavit, require surety, and issue a replacement; original, if found, must be surrendered (Sec. 189 NIL).

Q5: How do I enforce an e-signed PN? Print audit-log certificate, offer expert testimony on integrity, and file as electronic evidence under A.M. No. 01-7-01-SC.

15. Final Thoughts

A well-drafted, properly stamped, and fairly negotiated Promissory Note is cheap insurance against disputes, facilitates financing, and protects both lender and borrower. Always update templates to reflect BSP circulars and evolving Supreme Court jurisprudence, and when in doubt, consult counsel.

This article is for informational purposes only and does not constitute legal advice. Seek independent counsel for specific situations.