The Securities and Exchange Commission (SEC) has lowered the effective interest rate cap to 12 percent per month on small loans effective April 1, 2026.
The move is part of the government’s effort to tighten limits on interest rates and related fees charged by financing and lending companies in the Philippines.
Under SEC Memorandum Circular No. 14, Series of 2025, the new 12 percent per month effective interest rate, or about 0.40 percent per day, applies to loans of less than P10,000 with payment terms of up to four months.
The effective interest rate encompasses the total nominal interest plus other fees and charges, excluding penalties and late payment fees. This rate is expressed as the rate that discounts estimated future cash flows to the net loan proceeds.
Financing and lending companies are also prohibited from charging nominal interest rates higher than 6 percent per month, or roughly 0.20 percent per day.
“The recalibrated interest rate cap offers a balanced and sustainable framework that considers the interests of both lenders and borrowers, consistent with the Commission’s mandate of promoting consumer protection while also ensuring the viability of legitimate financing and lending companies,” said SEC chairman Francisco Lim.
The Monetary Board, in consultation with the SEC, previously set the ceiling at 15 percent per month, or about 0.5 percent per day.
Penalties for late or nonpayment are now capped at 5 percent per month on the outstanding scheduled amount due.
The total loan costs, including interest, fees, charges and penalties, cannot exceed 100 percent of the amount borrowed, regardless of the loan’s duration.
The new rules will apply to all loans entered into, restructured or renewed starting on April 1, 2026. The SEC announced it would impose administrative sanctions against companies attempting to circumvent the interest rate cap.
