Loan agreement in the Philippines: Template, Key Clauses and Local Law (2026)

What a loan agreement is under Philippine law A loan agreement records money lent by one party to another on terms for repayment. Under the Civil Code of the Philippines (Republic Act No. 386), a money loan is a mutuum: the lender hands over a sum, and the borrower must return an equal amount of the same kind. One feature matters more than any other. A mutuum is a real contract, which means it is perfected only when the money is actually delivered. A bare promise to lend, with nothing handed over, does not yet bind the borrower to repay. The agreement sets out the amount, the interest, the repayment schedule, any security, and what happens on default. For a private one-off loan the document can be short; for business or secured lending it is longer and more careful. Either way, Philippine law places a few firm requirements on top of whatever the parties agree. This page is general information, not legal advice. Interest rules and financial regulation change, so confirm the current position with a Philippine lawyer or the relevant regulator before you rely on a clause. ## What local law requires Interest must be stipulated in writing. Under Article 1956 of the Civil Code, no interest is due unless it has been expressly agreed in writing. An oral promise to pay interest is not enforceable. So if the loan carries interest, the rate and how it is calculated must appear in the signed document. There is no fixed usury ceiling, but rates can still be struck down. The old Usury Law set rate caps, but Central Bank Circular No. 905 (1982) suspended those ceilings, and the Supreme Court has since treated usury as legally non-existent, leaving parties free to agree a rate. That freedom is not unlimited. Courts will reduce interest they find unconscionable or iniquitous, weighing the circumstances of the borrower and the deal. A rate that is grossly one-sided can be cut down even though no statutory cap applies. Interest rates must be mutually fixed, not left to one side. Article 1308 of the Civil Code requires that a contract bind both parties, so a clause that lets the lender alone change the interest rate at will can be challenged for want of mutuality. If the rate is variable, tie it to an external, verifiable benchmark rather than the lender's own discretion. Disclosure and consumer rules apply to regulated lenders. Banks and financing companies are subject to the Truth in Lending Act and the oversight of the Bangko Sentral ng Pilipinas, including rules on disclosing the true cost of credit. Confirm the current regulatory requirements if the lender is a financial institution. ## A loan agreement template you can adapt ```

LOAN AGREEMENT Date: [date] Lender: [full legal name, address] Borrower: [full legal name, address] 1. LOAN AMOUNT The Lender lends and the Borrower acknowledges receipt of PHP [amount] (the "Loan"). This Agreement takes effect on delivery of the Loan. 2. INTEREST The Loan bears interest at [rate]% per annum, calculated on [basis]. [For a variable rate: the rate is [benchmark] plus [margin], adjusted on each [date].] Interest is expressly stipulated in writing as required by Article 1956 of the Civil Code. 3. REPAYMENT The Borrower will repay the Loan and interest by [lump sum on [date] / [number] equal monthly instalments of PHP [amount] beginning [date]]. Payments are made to [account]. 4. PREPAYMENT The Borrower may prepay in whole or in part [without penalty / on the following terms]. 5. DEFAULT AND PENALTY On failure to pay when due, [penalty charge] applies and the whole Loan may become immediately due after [number] days written notice. 6. SECURITY (if any) The Loan is secured by [describe collateral / guarantee]. A separate [real estate mortgage / chattel mortgage / pledge] is executed and, where required, registered. 7. REPRESENTATIONS Each party has the authority to enter into this Agreement and the information it has given is true. 8. GOVERNING LAW AND DISPUTES This Agreement is governed by the laws of the Republic of the Philippines. Disputes will be resolved by [courts of [city] / arbitration]. SIGNED by the Lender ____________ SIGNED by the Borrower ____________ [Notarised before a notary public on [date], if required.]

- An eye-watering rate. No cap does not mean any rate is safe; courts cut down unconscionable interest.
- A lender-only rate reset. A floating rate controlled by one party alone can be struck down for lack of mutuality.
- No proof of delivery. If the document does not record that the money changed hands, the loan may be treated as unperfected.
- Collateral described loosely or left unregistered. A vague or unregistered security interest may not give the lender the priority it expects. ## How this differs from other countries Some countries keep hard statutory interest caps or licensing rules for all lenders. The Philippines suspended its usury ceilings decades ago, so the discipline comes from the courts striking down unconscionable rates and from the mutuality rule, rather than from a fixed number. Regulated lenders still face disclosure duties under the Truth in Lending Act and Bangko Sentral ng Pilipinas rules. Confirm the current regulatory position if you are lending as a business. ## Keeping the loan on track after signing A loan agreement lives for as long as the money is outstanding. Payment dates arrive, a rate resets against its benchmark, a borrower asks to restructure, and a default notice has to go out on time. The work after signing is tracking those dates and keeping every amendment and notice tied to the original terms, so nobody loses the thread of what is currently owed. That is the same challenge companies face across all their contracts at once. Drafting from a clear template, catching a clause that could be read against you, editing a repayment term in plain language, and holding every version with its date and every due date in view can live in one AI workspace tuned to how your company contracts. [Adira](https://adiralaw.com) is built around that single-workspace idea, India-first today with other jurisdictions on the roadmap, so deep Philippine coverage is something to verify rather than assume. For a single loan, the template above is enough on its own; the point worth borrowing is that money terms are easier to trust when the document and the reminders around it stay in one place and in step.