VESTED INTERESTS
Loans and Interest Rates

This is the bane of all borrowers everywhere, the amount of interest that is charged on their loans. But be advised that no interest is due unless expressly stipulated in writing. So if it is not written down, you don’t have to pay it.

Ordinarily, the parties are free to stipulate on the rate of interest with respect to any loan or forbearance (read: delay in the collection) of any money, goods or credits, as there is no longer any limit on interest with the repeal of the Usury Law. This statute previously capped the maximum rate for loans secured with real estate mortgage at 12% per annum (SPOUSES BAUTISTA vs. PILAR DEVELOPMENT CORPORATION, [G.R. No. 135046. August 17, 1999]). And anything beyond that is “usury.” But that is no longer a legal term which we can use. It has been replaced by another word.

One would then think that any lender or 5/6 operator would now be free to impose whatever interest they might see fit. They can, but the validity of stipulations on interest may still be questioned before the courts and invalidated if it is “unconscionable” (read: unfair), the new term which we can now use. As held in Medel, et al. vs. Court of Appeals, et al.,[G.R. No. 131622. November 27, 1998.]:

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