Requesting Payment Extensions on Online Loans Without Penalties in the Philippines
A comprehensive legal and practical guide (2025 edition)
1 | Why This Matters
The explosion of app‑based lending, “buy‑now‑pay‑later” (BNPL) services, and fully‑digital micro‑loans has made credit more accessible—but also exposed millions of Filipinos to high default charges that can snowball in weeks. Knowing how to seek a payment extension—while lawfully avoiding additional penalties or “late‑payment” fees—gives borrowers leverage they often assume they do not have.
2 | Primary Legal Sources
Below are the core statutes, regulations, and doctrines that shape any discussion of extensions and penalty waivers:
| Source | Key Section(s) | Relevance to Extensions / Penalties |
|---|---|---|
| Civil Code of the Philippines (Arts. 1159‑1170, 1229, 1306, 1308, 1375) | • Mutuality of contracts • Court power to reduce “unconscionable” interest or penalties (Art 1229) | Lets a court—or a negotiating borrower—argue that default charges are excessive or inequitable. |
| Rep. Act 9474 (“Lending Company Regulation Act of 2007”) & SEC Memo Circ. 18‑2019 | • Registration & disclosure duties • Prohibition of abusive collection | SEC can penalize online lenders that refuse reasonable restructuring requests or harass borrowers. |
| Rep. Act 8556 (“Financing Company Act”) | Similar provisions for financing companies offering consumer loans. | |
| Bangko Sentral ng Pilipinas (BSP) Circular 1154 s.2023 (supersedes earlier COVID‑era circulars) | • Mandatory hardship‑restructuring policies for BSP‑supervised financial institutions (BSFIs) • Caps on penalty interest | Creates a regulatory expectation that banks and e‑wallet lenders entertain payment‑holiday or term‑extension requests. |
| Consumer Act (RA 7394), Art. 52 & 55 | • “Unfair or unconscionable sales/credit practices” | A borrower may lodge a consumer‑protection case with the DTI/BSP/SEC. |
| Data Privacy Act (RA 10173) | Limits public “shaming” or unauthorized disclosure of a borrower’s personal data during collection. | |
| Bayanihan I & II Acts (2020) | Granted mandatory 30‑ to 60‑day grace periods on all consumer loans during the pandemic; although expired, they set a precedent still cited in negotiations. |
Tip: Even if your lender is not BSP‑supervised (many apps are SEC‑registered lending companies), you can still invoke the Civil Code’s equity provisions to challenge punitive penalties.
3 | Contract Basics: Penalty & Default Clauses
Penalty interest is a liquidated damages clause. It is valid only if it is reasonable and expressly accepted.
The clause must be clear and conspicuous under Art. 1375; buried stipulations can be struck out.
Courts—and in practice, regulators—may lower or nullify penalties if:
- The borrower has already paid a substantial portion.
- The penalty exceeds the principal or is grossly disproportional (Art. 1229).
4 | Legal Theories for Penalty‑Free Extensions
- Equitable Reduction (Art. 1229): “Penalty is iniquitous or unconscionable.”
- Force Majeure / Fortuitous Events (Art. 1174): Calamity, serious illness, or pandemic disruptions can excuse delay.
- Good‑Faith Performance (Art. 1159): A borrower offering partial payment shows good faith; refusal may render the lender in bad faith.
- Regulatory Mandate: BSP Circular 1154 forces BSFIs to offer “grace periods, loan term extensions, or other relief.”
- Public Policy Against Predatory Lending: SEC may suspend or revoke a lending company’s authority for “unfair collection.”
5 | Step‑by‑Step: How to Ask for an Extension and Waiver
| Step | Action | Practical Pointers |
|---|---|---|
| 1. Audit Your Contract & Balance | Get the latest statement of account (SOA). Verify principal, accrued interest, penalties. | Errors are common; contest wrong numbers. |
| 2. Gather Hardship Proof | Payslip showing job loss, medical certificate, calamity certificate (barangay or LGU), etc. | Most lenders demand documentary basis. |
| 3. Draft a Formal Letter / E‑mail | Include: (a) concise hardship story, (b) requested new maturity date, (c) commitment to resume payments, (d) invocation of equity/BSP Circular. | Keep tone professional; attach ID + SOA + hardship proof. |
| 4. Send via Traceable Means | In‑app chat plus registered mail or e‑mail to the Compliance Officer listed on the SEC/BSP website. Keep screenshots. | |
| 5. Follow Up & Escalate | Wait 7‑10 banking days. Then (a) file a complaint with SEC CGFD or BSP FCPD, (b) copy NPC if there is data‑privacy abuse, (c) notify DTI if consumer‑act breach. | |
| 6. Document All Calls/SMS | Maintain a log of harassment incidents (time, number, message). | Needed if you later sue for damages or file a criminal complaint under Anti‑Obscenity / cyber‑harassment laws. |
6 | Regulatory & Judicial Remedies
SEC Complaint (for lending/financing companies)
- Fill out SEC’s SPO Form and email cgfd_md@sec.gov.ph.
- SEC can direct the company to stop further penalties and restructure the loan.
BSP Complaint (for BSFIs & e‑wallet lenders)
- Use BSP Online Buddy (BOB). BSP may impose fines or issue directive letters.
National Privacy Commission
- For public posting, contacts‑book harvesting, or threats to “contact your employer.”
Barangay Mediation or Small‑Claims Court
- ≤ P400,000 (2021 Rule) can be heard in first‑level courts with no lawyers required.
- You may plead “penalty unconscionable” and ask the court to approve a payment plan.
Regional Trial Court (Civil Action)
- For larger loans, or if declaratory relief is needed to reform/annul clauses.
- Courts routinely slash 36 %–60 % per annum “penalty interest” to 6 % legal interest.
7 | Risks & Realities
| Risk | What Happens | Mitigation |
|---|---|---|
| Credit Information System (CIS) negative report | Future bank loans rejected. | Negotiate “settled” status upon full payment of restructured plan. |
| Aggressive 3rd‑party collectors | Daily calls, workplace contact, threats of suit | Quote SEC MC 18‑2019; record calls. File complaints swiftly. |
| Additional processing fees | Lender may charge extension fee | Haggle for waiver; many lenders agree if partial payment is made upfront. |
8 | Alternatives to an Extension
- Loan Restructuring: Lower rate, longer term, fresh promissory note.
- Balance‑Transfer to a Bank: Often 1.5 % monthly add‑on ≈ 33 % APR but still cheaper than app‑based 100+ % APR.
- Debt Consolidation via Credit Cooperative: Some co‑ops cap interest at 12 % p.a.
- Pag‑IBIG Multi‑Purpose Loan (if qualified) to retire high‑cost loans.
9 | Best‑Practice Checklist
- ▢ Act before the due date—greater leverage and keeps credit record clean.
- ▢ Offer partial payment (e.g., 20–30 % of principal) to show good faith.
- ▢ Put everything in writing; verbal promises are hard to prove.
- ▢ Avoid stacking multiple extensions; courts may view repeated non‑payment as bad faith.
- ▢ Keep copies of SEC/BSP Circulars handy to quote exact provisions.
10 | Template: Payment‑Extension & Penalty‑Waiver Request
Date: 24 July 2025 To: Compliance Officer, [Name of Online Lending App] Re: Loan No. 123456 – Request for 60‑Day Extension and Waiver of Penalties
Dear Sir/Madam:
- I am writing to request a sixty‑day extension of my loan’s maturity from 31 July 2025 to 29 September 2025, without penalty interest or late‑payment charges.
- My employment was terminated on 15 July 2025 (see attached Certificate of Separation); I am now undergoing job placement.
- I have already paid ₱12,000 of the ₱15,000 principal (80 %). Imposing the stipulated 8 % weekly penalty would raise my obligation to an unconscionable level, contrary to Article 1229 of the Civil Code and BSP Circular 1154 s.2023 on financial‑consumer protection.
- I am committed to settle the remaining ₱3,000 plus the agreed regular interest of 3 % per month within the requested extension period. Should my employment resume earlier, I will pay sooner.
- Kindly confirm approval within seven (7) banking days. Otherwise, I will elevate my request to the Securities and Exchange Commission.
Respectfully, [Signature / Name / Address / Contact No.]
(Attach SOA, ID, proof of hardship.)
11 | Frequently Asked Questions
| Q | A |
|---|---|
| Can the lender sue me immediately after default? | They must first send a demand letter. Under Supreme Court rules, filing suit without prior demand may be dismissed for lack of cause or referred to barangay mediation. |
| Will requesting an extension hurt my credit score? | A granted extension usually reports as “Restructured” (not negative) if payments resume. A rejected request does nothing unless you default. |
| What if the app keeps adding hidden fees? | Demand an updated SOA. Hidden or undeclared charges violate RA 7394 and SEC rules—grounds to dispute the debt. |
| Can I record collection calls? | Yes, one‑party consent is enough in PH. Recordings are admissible in administrative cases. |
| Do I need a lawyer? | For amounts ≤ ₱400k, Small‑Claims courts forbid lawyers in hearings; you can self‑represent. For larger or complex cases, counsel is advisable. |
12 | Conclusion & Disclaimer
Requesting an extension without incurring penalties is not a favor—it is a right rooted in Philippine contract law, consumer‑protection statutes, and recent BSP/SEC policy. Armed with documentation, timely communication, and knowledge of the applicable rules, borrowers can negotiate fair terms and avoid snowballing debt traps.
Disclaimer: This guide provides general legal information as of July 24 2025 and is not a substitute for formal legal advice. Consult a qualified Philippine lawyer for case‑specific counsel.
Stay informed, act early, and negotiate from a position of knowledge.