No Interest in Writing, No Interest: Article 1956 Explained
Quick answer: Under Article 1956 of the Civil Code, a lender can collect interest for the use of money only if the borrower expressly agreed to it in writing. An oral promise is not enough. Without that writing, the lender still recovers the principal, plus 6% a year legal interest as damages once the borrower is in delay.
What decides it: whether a document the borrower agreed to states the interest (a rate or a fixed amount), whether that agreement was genuinely consented to, and when the borrower was placed in delay. Interest a borrower already paid without a written stipulation may have to be returned (Civil Code Art. 1960).
What does Article 1956 say, and which interest does it cover?
Article 1956 of the Civil Code (RA 386) is one sentence: “No interest shall be due unless it has been expressly stipulated in writing.” The Supreme Court reads it as two conditions that must both be present: “(1) there was an express stipulation for the payment of interest; and (2) the agreement for the payment of interest was reduced in writing” (Siga-an v. Villanueva, G.R. No. 173227, January 20, 2009).
The same case explains that the rule covers only monetary interest, the compensation the parties fix for the use of money. It does not stop a court from imposing compensatory interest as damages when a debtor fails to pay. This table separates the two.
| Kind of interest | Where it comes from | Needs a written agreement? | Rate |
|---|---|---|---|
| Monetary (conventional) interest | The parties’ contract, as the price for using the money | Yes. No writing, no monetary interest (Art. 1956) | The rate or amount written in the agreement, subject to court reduction if unconscionable |
| Compensatory (legal) interest on a money debt | The law, as damages for delay (Art. 2209) | No. It applies even if the loan is silent | 6% a year from demand, per Nacar v. Gallery Frames |
| Interest on unpaid interest | The law, from judicial demand (Art. 2212), or a written capitalization clause (Art. 1959) | Only for compounding before a case is filed | Legal interest, unless validly capitalized by stipulation |
So a lender who has no written interest clause is not left with nothing. The principal stays collectible, and legal interest runs once the borrower is in delay (Arts. 1169 and 2209). If you need the computation of legal interest itself, see our guide on how legal interest on unpaid debt is computed.
Does this apply to your situation?
Article 1956 is likely the deciding rule if all of these are true:
- The money was lent (or payment was deferred) and the lender is asking for interest on top of the principal.
- The interest was agreed orally, implied from “custom,” or written only on a document the borrower did not agree to.
- The dispute is about interest for the use of the money, not damages for late payment.
Watch for these exceptions and overlaps:
- Delay changes the picture. Even without a written rate, legal interest is due from demand (Art. 2209; Siga-an).
- A written rate can still be cut. A rate that is in writing can be reduced if it is unconscionable; see when courts reduce excessive interest.
- Usury and special laws. Contracts designed to get around usury laws are void, and usurious contracts follow the Usury Law and special laws (Arts. 1957 and 1961). Bank and financing loans also carry disclosure rules under the Truth in Lending Act (RA 3765), which the Court cited in Silos v. PNB.
What counts as “in writing” for Article 1956?
The writing must show that the borrower expressly agreed to pay interest. A paper that merely mentions interest is not always enough. This table applies the decided cases to common documents.
| Document | Enough for interest? | Why |
|---|---|---|
| Signed promissory note stating a rate | Yes, for the period it covers | Express stipulation reduced to writing (Art. 1956) |
| Note stating a fixed amount per month | Yes, but only that amount for that term | In Prisma v. Menchavez, ₱40,000 a month for six months was agreed; legal interest applied after the term |
| Board resolution allowing a loan “at not more than 4%” | No | Prisma: it only defines the officer’s authority; it is not the lender–borrower agreement |
| Note the borrower was pressured to copy | No | Siga-an: copied under threat, it did not show genuine consent to interest |
| Rate filled in or raised by the lender alone | No | Silos v. PNB: unilateral rate setting violates mutuality (Art. 1308) |
| Text, chat or email stating the agreed rate | Possibly | An electronic document can meet a writing requirement if reliable and authenticated (RA 8792, Secs. 7 and 11) |
| Oral agreement, even with witnesses | No | The law requires the stipulation itself to be written (Art. 1956) |
On electronic messages: the Electronic Commerce Act says that where the law requires a document to be in writing, “that requirement is met by an electronic document” that “maintains its integrity and reliability and can be authenticated” (RA 8792, Sec. 7), and the person presenting it carries the burden of proving it is authentic (Sec. 11). We did not find a Supreme Court decision applying this to an Article 1956 interest claim in this check, so treat chat-only interest as contestable: the borrower’s own message clearly accepting a rate is far stronger than a lender’s one-sided reminder.
What if interest was already paid without a written agreement?
Article 1960 provides: “If the borrower pays interest when there has been no stipulation therefor, the provisions of this Code concerning solutio indebiti, or natural obligations, shall be applied, as the case may be.”
- Paid by mistake: recoverable. Under Article 2154, something received without a right to demand it and delivered by mistake must be returned. In Siga-an, the borrower paid ₱335,000 in interest on an oral loan with no written interest clause; the Court held the payment “was clearly a mistake” and ordered the lender to return it. Read more on solutio indebiti.
- Paid knowingly as a free choice: may be kept. Article 1960 also points to natural obligations, which “authorize the retention of what has been delivered” after voluntary fulfillment (Art. 1423). A lender will argue this; the borrower answers with proof of mistake or pressure, as in Siga-an.
- Paid above usury limits: Article 1413 lets the debtor recover interest paid in excess of what the usury laws allow, with interest from the date of payment.
Can the lender change the rate or charge interest on interest?
Not alone. A contract “must bind both contracting parties; its validity or compliance cannot be left to the will of one of them” (Art. 1308). In Spouses Silos v. Philippine National Bank, G.R. No. 181045, July 2, 2014, the Court struck down clauses letting the bank set and raise rates on its own, quoting its earlier rulings that any change in the rate “must be mutually agreed upon, otherwise, it is bereft of any binding effect,” and that a borrower’s silence after receiving notices of increases is not consent.
Compounding is also limited. Interest due and unpaid does not earn interest, except that the parties “may by stipulation capitalize the interest due and unpaid” (Art. 1959), and interest due earns legal interest from the time it is judicially demanded (Art. 2212).
Worked example: an oral 5% a month loan
Fictional facts: Ana lends Ben ₱100,000 on 1 February 2026. They agree orally on 5% a month. Ben signs a receipt that says only “Received ₱100,000, payable on 31 July 2026.” Ben pays ₱5,000 a month from February to July (₱30,000), then nothing. Ana’s written demand reaches him on 1 September 2026, and the debt is paid on 1 March 2027. Current legal interest: 6% a year, the rate set from 1 July 2013 by BSP Monetary Board Circular No. 799 and adopted in Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013 (checked 5 November 2026).
| Item | Result | Basis |
|---|---|---|
| 5% monthly interest | Not collectible; it was never written | Art. 1956; Siga-an |
| The ₱30,000 Ben paid as “interest” | Ben may claim it back or ask that it be credited, if paid by mistake | Arts. 1960, 2154; Siga-an |
| Principal | ₱100,000 is still owed | Loan obligation; receipt |
| Start of delay | 1 September 2026, the demand date, because the receipt has no “default without demand” clause | Art. 1169 |
| Legal interest, 1 Sept 2026 to 1 Mar 2027 | ₱100,000 × 6% × 6/12 = ₱3,000 | Art. 2209; Nacar |
A day count (181 days ÷ 365 × ₱6,000) gives ₱2,975.34; the court fixes the method in its judgment. Had the receipt said “with interest of 2% per month until fully paid,” Ana could have claimed 2% a month instead of legal interest, subject to the court’s power to reduce an unconscionable rate. And if the writing covers only a fixed term, legal interest takes over after it ends, as in Prisma Construction v. Menchavez, G.R. No. 160545, March 9, 2010.
What are the deadlines?
| Action | Period | What starts the clock | Authority |
|---|---|---|---|
| Sue to collect a written loan | 10 years | When the right of action accrues, usually the due date or demand | Art. 1144(1) |
| Sue to collect an oral loan | 6 years | When the right of action accrues | Art. 1145(1) |
| Recover interest paid by mistake | 6 years (quasi-contract) | When the right of action accrues; usually counted from the payment, so act early | Arts. 1145(2), 2154 |
| Legal interest begins | Not a filing deadline | Judicial or extrajudicial demand, unless the contract says default needs no demand | Arts. 1169, 2209; Nacar |
| Interest on unpaid interest | Not a filing deadline | Filing of the case (judicial demand) | Art. 2212 |
Prescription is interrupted by filing in court, a written extrajudicial demand by the creditor, or a written acknowledgment of the debt by the debtor (Art. 1155). Keep a copy of every demand letter and every message in which the other side admits the debt.
Your options and what to do next
If you are the borrower being charged unwritten interest:
- Collect the loan papers and list every payment, marking which ones the lender treated as interest.
- Reply in writing: offer to pay the principal, state that no interest was stipulated in writing (Art. 1956), and ask that interest payments be credited or returned (Arts. 1960, 2154).
- If you live in the same city or municipality as the lender, bring the dispute to the barangay first. Court filing generally requires a certificate that conciliation failed (RA 7160, Secs. 408 and 412). See our barangay conciliation guide.
- If sued, raise Article 1956 and any refund claim in your response, with your payment records.
If you are the lender without a written interest clause:
- Send a written demand for the principal. It places the borrower in delay, starts legal interest (Arts. 1169, 2209) and interrupts prescription (Art. 1155).
- For future loans, put the rate, the period it covers and a default clause in a signed note; see what a promissory note should include.
- Go through barangay conciliation where it applies, then file a small claims case if the amount is within the current Supreme Court ceiling (check it before filing), or a collection of sum of money case if it is larger.
- If there is no written loan document at all, use our guide on proving a verbal or GCash loan.
Documents and evidence to gather
| Document | How important | What it proves |
|---|---|---|
| Promissory note, loan agreement or acknowledgment receipt | Essential | The loan, the due date and whether interest was written |
| Proof of release of the money (check, bank or e-wallet record) | Essential | The principal actually received |
| Receipts and transfer records of every payment | Essential | What was paid and what was labeled interest |
| Written demand and proof of receipt | Essential for legal interest | The date delay began (Art. 1169) |
| Texts, chats or emails about the rate | Helpful | Whether the borrower expressly accepted a rate (RA 8792, Sec. 7) |
| Barangay certificate to file action | Confirm with the barangay and court | That conciliation was tried where required |
Example: “Usapan lang namin ang 5% kada buwan”
Fictional example. Si Liza ay nangutang ng ₱50,000 sa kapitbahay niyang si Rodel. Ang napag-usapan, 5% kada buwan, pero walang nakasulat; ang pinirmahan lang ni Liza ay resibo ng ₱50,000. Pagkalipas ng apat na buwan, nakapagbayad na siya ng ₱10,000 na “interest,” at sinisingil pa siya ni Rodel ng ₱60,000. Sa ilalim ng Art. 1956, ang principal na ₱50,000 lang ang talagang utang; ang ₱10,000 na naibayad bilang interest ay pwede niyang hilinging ibawas o ibalik kung nagbayad siya sa pag-aakalang obligado siya (Arts. 1960, 2154). Kung hindi pa rin siya makabayad matapos ang written demand ni Rodel, tatakbo ang 6% legal interest mula sa demand. Pareho silang taga-barangay, kaya sa Lupon muna sila dapat mag-usap bago magsampa ng kaso.
Contact the right office
- Barangay (Lupong Tagapamayapa): where the parties live in the same city or municipality (RA 7160, Sec. 408). Bring IDs, the loan papers, payment records and any demand letter.
- Office of the Clerk of Court, first-level court: for small claims forms and filing fees in the city or municipality where you or the other party lives.
- Free legal help: see where to get free legal aid, including the Public Attorney’s Office.
- Bank or lending company loans: banks are supervised by the Bangko Sentral ng Pilipinas, and lending and financing companies by the Securities and Exchange Commission. Use the complaint channel on the regulator’s own website.
Checked on 5 November 2026: barangay, court and PAO contact details vary by locality and were not verified for this page. The BSP consumer page we tried did not open and the SEC website did not load for our check, so their complaint links are not given here; confirm the current channel on each regulator’s official site.
Key takeaways
- Agreed interest on a loan needs two things: an express stipulation and a writing (Art. 1956; Siga-an).
- Without it, the principal and 6% legal interest from demand are still collectible (Art. 2209; Nacar).
- A fixed monthly amount in writing counts, but only for the term written (Prisma).
- A lender cannot set or raise the rate alone (Art. 1308; Silos).
- Unwritten interest paid by mistake can be recovered (Arts. 1960, 2154).
- Electronic messages can satisfy a writing requirement if reliable and authenticated (RA 8792, Sec. 7), but expect a fight over them.
Related guides
- Legal interest on unpaid debt: how it is computed
- Can a court reduce excessive or unconscionable interest?
- Is a promissory note enforceable?
- Solutio indebiti: recovering money paid by mistake
- Collecting unpaid debt: what a creditor must prove
Frequently asked questions
Is a verbal agreement to pay interest enforceable in the Philippines?
Not as interest for the use of the money. Article 1956 requires the stipulation to be express and in writing. The loan itself is still valid, so the principal can be collected, with legal interest once the borrower is in delay.
Does the written agreement need to state a percentage?
No. A fixed peso amount works. In Prisma v. Menchavez, a note for ₱40,000 a month over six months was enforced as written, but only for those six months; after that, legal interest applied.
I already paid interest that was never written. Can I get it back?
Often, yes. Under Article 1960, solutio indebiti applies, and in Siga-an v. Villanueva the Court ordered the lender to return interest paid by mistake. If you paid knowingly as a free choice, the lender may argue it can keep the payment under the natural-obligation rules.
Is a Messenger or Viber message enough to prove agreed interest?
It may be. RA 8792, Sec. 7 lets an electronic document meet a writing requirement if it is reliable and can be authenticated, and the person relying on it must prove authenticity. A clear message from the borrower accepting the rate is the strongest form.
Can a lender increase the interest rate during the loan?
Only with the borrower’s agreement. Unilateral increases violate the mutuality of contracts under Article 1308, and the borrower’s silence after a notice of increase is not consent (Silos v. PNB).
Does Article 1956 stop legal interest on a late debt?
No. Article 1956 covers monetary interest only. Legal interest of 6% a year on a money debt runs from judicial or extrajudicial demand as damages for delay (Art. 2209; Nacar).
Can unpaid interest itself earn interest?
Only in two ways: the parties agree to capitalize unpaid interest (Art. 1959), or a case is filed, after which interest due earns legal interest from judicial demand (Art. 2212).
Pwede ba akong singilin ng interest kahit walang nakasulat?
Hindi pwede ang napagkasunduang interest kung walang nakasulat (Art. 1956). Pero kapag hindi ka nagbayad matapos kang singilin nang pormal, pwedeng magpataw ang korte ng 6% legal interest kada taon mula sa demand.
Nagpautang ako nang walang kasulatan. Paano ko masisingil ang interest?
Ang principal ang sigurado mong masisingil. Magpadala ng written demand para magsimula ang legal interest, dumaan sa barangay kung pareho kayo ng lungsod o bayan, at kung hindi pa rin magbayad, mag-file ng small claims o collection case.
Pinapirma ako ng note na may interest kahit ayaw ko. Valid ba iyon?
Hindi sapat ang papel kung pinilit ka lang. Sa Siga-an v. Villanueva, kinopya ng borrower ang note dahil tinakot siya, kaya hindi ito itinuring na tunay na kasunduan sa interest. Itabi ang ebidensya ng pamimilit at kumonsulta sa abogado o sa PAO.
Sources
- Civil Code of the Philippines (RA 386), Arts. 1144, 1145, 1155, 1169, 1308, 1413, 1423, 1956, 1957, 1959, 1960, 1961, 2154, 2209, 2212
- Electronic Commerce Act of 2000 (RA 8792), Secs. 7 and 11
- Local Government Code (RA 7160), Secs. 408, 410 and 412
- Siga-an v. Villanueva, G.R. No. 173227, January 20, 2009: monetary interest needs an express written stipulation; unwritten interest paid by mistake must be returned under Arts. 1960 and 2154.
- Prisma Construction & Development Corp. v. Menchavez, G.R. No. 160545, March 9, 2010: a written fixed monthly sum applies only for its stated term; a board resolution is not an interest stipulation.
- Spouses Silos v. Philippine National Bank, G.R. No. 181045, July 2, 2014: unilateral interest-rate setting violates mutuality under Art. 1308.
- Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013: 6% legal interest from 1 July 2013 under BSP-MB Circular No. 799; absent written stipulation, interest runs from demand.
Sources checked: 5 November 2026 (Asia/Manila) — Civil Code Arts. 1144, 1145, 1155, 1169, 1308, 1413, 1423, 1956, 1957, 1959, 1960, 1961, 2154, 2209 and 2212; RA 8792, Secs. 7 and 11; RA 7160, Secs. 408, 410 and 412; and the four Supreme Court decisions listed above.
Featured image: Scott Graham / Unsplash (Unsplash License). The image is illustrative; the person shown is not a party to any case discussed here.
This page is general legal information about interest on loans under Article 1956 of the Philippine Civil Code. It is not legal advice for your facts. CivilLaw.ph is not a court, the BSP, the SEC or any government office, does not guarantee any outcome, and reading this page does not create a lawyer-client relationship. For advice on your situation, consult a lawyer or the Public Attorney’s Office.