The legal interest rate for personal loans in the Philippines depends on whether there’s a written agreement between the borrower and the lender:
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Rate with Written Agreement: The Usury Law (Act No. 2655) sets the maximum legal rate for loans with a written agreement at 12% per annum. This applies to most personal loans offered by banks, lending companies, and other regulated institutions.
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Rate Without Written Agreement: If there’s no written agreement specifying the interest rate, the Usury Law sets the default rate at 6% per annum. This scenario is less common for personal loans but might apply in specific situations.
Here are some additional points to consider:
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Regulations by BSP: The Bangko Sentral ng Pilipinas (BSP) also issues circulars that set interest rate ceilings for different types of loans and lending institutions. These circulars can change periodically, so it’s crucial to check with the specific lender or the BSP website for the latest rates: https://www.bsp.gov.ph/
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Effective Interest Rate (EIR): When comparing loan offers, be sure to consider the Effective Interest Rate (EIR), which takes into account all loan fees and charges, not just the stated interest rate. This will give you a more accurate picture of the total cost of borrowing.
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