Quick answer
Before you sign or tap Accept, ask for the written loan disclosure and repayment schedule. Compare three numbers: the cash you’ll actually receive, the effective interest rate (EIR), and the total pesos you’ll pay if you pay on time. A low advertised rate can still mean an expensive loan if the lender deducts fees upfront, calculates interest on the original balance, or stretches payments over a longer term. lawphil.net
The Philippines has different ceilings for different credit products. For qualifying unsecured, general-purpose loans of ₱10,000 or less with terms of four months or less, SEC rules cap nominal interest at 6% per month and EIR at 12% per month for loans entered into, restructured, or renewed from 1 April 2026. This rule covers financing and lending companies, including loans they offer through their online platforms. Credit cards have separate BSP limits. Securities and Exchange Commission
Get the full price before accepting
The Truth in Lending Act (Republic Act No. 3765) requires a covered creditor to give you a clear written disclosure before the transaction is completed. It must show, as applicable, the amount financed, the finance charge in pesos, the annual rate required by the applicable rules, and separately itemized charges connected with the transaction but outside the finance charge. If you’re buying an item on installment, the disclosure also covers the cash price and any down payment or trade-in, where applicable. The Financial Products and Services Consumer Protection Act (Republic Act No. 11765) also requires sufficient disclosure before contracting so you have time to review and compare. lawphil.net
Ask the lender for these figures in writing and save a copy you can open after the transaction.
| What to check | What to ask for |
|---|---|
| Amount financed and net proceeds | How much am I borrowing on paper? How much will reach my account after deductions? |
| Interest and EIR | Is the quoted rate monthly or annual? Is it an add-on rate or a rate on the remaining balance? What is the EIR, and what fees went into it? |
| Repayment schedule | How much is due on each date, including the last payment? Is there a larger final payment? |
| Fees and insurance | Which charges are mandatory? Which are deducted, paid separately, or added to the loan balance? |
| Late payment and default | What triggers each charge? What amount is it calculated on, and how often is it assessed? |
| Early payment and rate changes | How do I make a partial prepayment or get a full payoff quote? If the rate can change, when and how is it reset? |
If insurance or another product is required as a condition for getting the loan, RA 11765 gives the financial consumer the option to choose the provider, subject to the lender’s reasonable standards. Ask for those standards and the cost before agreeing. lawphil.net
Compare loans using the same amount and term
Nominal interest is the stated interest rate. EIR reflects the timing of the money you receive and the payments you make, including applicable finance charges. An add-on rate calculates interest on the original principal for the stated term. A diminishing-balance rate applies interest to the remaining principal. The same advertised percentage can produce different costs under those methods. For bank loans covered by BSP Circular No. 730, the BSP directs banks to charge interest on the outstanding balance at the start of the interest period. bsp.gov.ph
Suppose a lender approves ₱20,000, deducts a ₱1,000 processing fee, and schedules six payments of ₱3,700. You receive ₱19,000 and repay ₱22,200. Your on-time cost is ₱3,200. Count the deducted fee once. It already reduced the cash you received. If you pay a required fee separately, include that payment in your comparison.
For a fair comparison, ask both lenders to quote for the same net cash amount and the same repayment term. Compare EIRs expressed over the same period, then compare the peso cost and check whether the due dates fit your paydays. A longer term can lower the installment while increasing the total you pay. For an independent check, use the BSP Loan Calculator. LoanCalculator.aspx
Check which legal limits apply
Small loans from financing or lending companies
Under SEC Memorandum Circular No. 14, series of 2025, check all the eligibility conditions. The loan must be unsecured, for general purposes, for ₱10,000 or less, and for four months or less. It must be offered by a financing or lending company, including through its online lending platform. For qualifying loans entered into, restructured, or renewed from 1 April 2026, the ceilings are as follows. Securities and Exchange Commission
| Charge | Ceiling |
|---|---|
| Nominal interest | 6% per month |
| Effective interest | 12% per month, including applicable loan fees such as processing and service fees, but excluding late-payment or nonpayment fees and penalties |
| Late-payment or nonpayment penalties | 5% per month on the outstanding scheduled amount due |
| Total cost | 100% of the amount borrowed for all interest, fees, charges, and penalties combined, regardless of how long the loan remains outstanding |
The total-cost cap limits the charges added to principal. For example, on a covered ₱8,000 loan, the combined charges are capped at ₱8,000. The lender must also comply with the separate ceilings on interest and penalties. If your loan predates 1 April 2026, check when it was made and whether it was later renewed or restructured. The previous framework under BSP Circular No. 1133 and SEC Memorandum Circular No. 3, series of 2022 used a 15% monthly EIR ceiling for covered loans. Securities and Exchange Commission
Credit cards
BSP Circular No. 1165 sets a 36% annual ceiling on credit card interest or finance charges, with a separate ceiling of 1% monthly add-on for credit card installment loans. For credit card cash advances, the circular permits a processing fee of up to ₱200 per transaction in addition to the applicable interest, with no other cash advance charge or fee. Check which category the issuer used when it billed you. bsp.gov.ph
Other loans and disputed rates
Identify the legal lender and the product before applying any ceiling. A loan outside the small-loan rule may be governed by a different product rule. Under Article 1956 of the Civil Code, interest charged for the use of borrowed money must be expressly agreed to in writing. Interest as damages for delay is a separate issue. Courts may review an agreed rate for unconscionability and may reduce excessive penalties. That assessment depends on the agreement and the circumstances. Supreme Court E-Library
What to do if a charge looks wrong
- Preserve the records. Save the ad, offer screens, disclosure statement, signed or accepted agreement, repayment schedule, proof of disbursement, receipts, account statements, and any renewal or restructuring terms. For a collection complaint, keep messages, screenshots, call logs, and the dates and names of the people involved.
- Dispute the specific entry in writing. Use the lender’s official consumer assistance channel. State the amount and date, explain the discrepancy, and request an itemized ledger showing principal, interest, fees, penalties, and how each payment was applied. Ask for the lender’s computation and the correction you seek. Keep the complaint reference number and response.
- Ask how the disputed amount will be handled while it’s investigated. For an alleged disputed amount or unauthorized transaction, RA 11765 requires the provider to suspend interest, fees, and charges pending its final investigation report or provide a similar reasonable accommodation. Ask for written confirmation of the accommodation and the treatment of any undisputed payments. lawphil.net
- Escalate to the appropriate regulator if the lender’s handling is unsatisfactory. For a bank or another BSP-supervised institution, use the BSP Consumer Assistance Mechanism after raising the matter with the institution. For a licensed financing or lending company or its online platform, follow the SEC complaint instructions and file through the SEC iMessage Portal. The SEC complaint page gives a separate reporting route for lending without a Certificate of Authority. For a cooperative lender under CDA supervision, follow the applicable CDA consumer protection rules. Consumer Protection
When help is urgent
- You receive a summons or a notice of foreclosure, repossession, or sale. Get Philippine legal advice promptly and check the deadline on the document. Treat the court or enforcement timetable separately from your billing complaint.
- You see an unauthorized loan or transaction. Contact the provider immediately through a verified channel, secure the affected account, and keep the transaction records and complaint reference. lawphil.net
- A collector threatens you or exposes your debt to others. Preserve the evidence and report the conduct promptly to the lender and its regulator. If you face an immediate physical threat, contact the police. RA 11765 prohibits abusive collection practices by financial service providers. lawphil.net
- You may have a Truth in Lending disclosure claim. Section 6(a) of RA 3765 gives you one year from the violation to bring the court action for the statutory disclosure penalty. If that deadline may be near, seek legal advice while pursuing the complaint. lawphil.net
Common mistakes to avoid
- Comparing a monthly add-on rate with an annual EIR. Ask for the same rate measure over the same period.
- Budgeting from the approved amount. Use the amount that will actually reach you after deductions.
- Treating a lower installment as proof of a cheaper loan. Add all payments and check for a larger final installment.
- Renewing or restructuring based on the new installment alone. Ask how much of the old principal, interest, and fees will carry over, and what the new agreement will cost in total.
- Assuming a disclosure dispute cancels the debt. Section 6 of the Truth in Lending Act provides a specific remedy for disclosure violations, and the Act generally preserves the contract’s enforceability. Ask for a written correction and address any payment or response deadlines. lawphil.net
Frequently asked questions
Is a “0% interest” loan free?
Check the cash price, net proceeds, required fees, and total payments. A transaction can carry a cost even if the stated interest rate is zero. lawphil.net
Can I pay off my loan early?
RA 11765 allows borrowers to prepay in whole or in part before maturity and requires disclosure of any prepayment costs or fees. Ask for a dated payoff quote. For partial prepayment, ask how the lender will apply it and request an updated schedule. lawphil.net
Does the small-loan cap apply to every loan made through an app?
The app is the channel. Check who actually extended the credit, whether the loan is unsecured and general-purpose, its amount and term, and when it was entered into, renewed, or restructured. Securities and Exchange Commission
Can I cancel after accepting a loan online?
Check the rules for your specific product and the lender’s written policy immediately. RA 11765 ties cooling-off periods to applicable laws or regulator rules and allows regulators to omit them for short-term transactions. Where a cooling-off period applies, approved processing costs may still be recoverable. lawphil.net
This article provides general Philippine legal information. The rules and remedies that apply to your loan depend on the lender, product, dates, and documents. Sources checked on 9 November 2026.