INTEREST RATES IN A NUTSHELL 1

Prevailing doctrine:

LARA’S GIFTS & DECORS, INC. v. MIDTOWN INDUSTRIAL SALES, INC.

G.R. No. 225433, 28 August 2019

COMPUTATION OF
NATURE OF OBLIGATION BREACHED INTEREST RATE
PERIOD2

Constituting Not excessive and Stipulated interest

With unconscionable rate3
loan,
stipulated
forbearance of
interest Excessive and From the date of
money, goods,
unconscionable extrajudicial or
credits, or
judicial demand
judgments Prevailing legal
No stipulated interest until fully paid
interest rate4
NOT Demand can be established
Constituting with reasonable certainty
loan,
forbearance of No interest rate From the date of the
money, goods, until demand can judgment of the trial
Demand cannot be established
credits, or be established court until fully paid
with reasonable certainty
judgments with reasonable
certainty

RATE OF LEGAL INTEREST FOR LOANS OR FORBEARANCE OF ANY MONEY, GOODS

OR CREDITS AND THE RATE ALLOWED IN JUDGMENTS

● Up to June 30, 2013 = 12%5

● July 1, 2013 and onwards - 6%6

1
Summarized by Siegfred Bayod Jr. This work is not copyrighted :)
2
Principal plus interest (when applicable)
3
without compounding any interest unless compounded interest is expressly stipulated by law or
regulation
4
Ibid.
5
Eastern Shipping Lines (G.R. No. 97412, July 12, 1994, 234 SCRA 78) and Subsection X305.1 of the
Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of
Regulations for Non-Bank Financial Institutions
6
Circular No. 799, Series of 2013, effective July 1, 2013.