Lending Money and Writing It Down

Which Document to Use

• Promissory Note. The borrower signs a promise to pay a fixed amount, on a set date or in installments, with or without interest. It is the main proof of the debt. Use the Promissory Note template.
• Acknowledgment Receipt. The borrower signs that they received the money on a given date. It is useful together with the note, especially for cash. Use the Acknowledgment Receipt template.
• Loan Agreement. For larger loans, a longer contract can add security (property the lender can go after if the loan is unpaid, such as a mortgage on land or a vehicle), guarantors (people who promise to pay if the borrower does not), and what happens if the borrower fails to pay.

Write the full names and addresses of both sides, the amount in words and figures, the due date, and how payment is made. Both sign. Keep the original; give the borrower a copy.

Interest Must Be in Writing

Article 1956 of the Civil Code says: "No interest shall be due unless it has been expressly stipulated in writing." If you agreed on interest only by word of mouth, you can collect the amount lent but not the agreed interest.

• State the rate clearly, for example "3% per month" or "12% per year", and whether it is simple or compounded (interest also charged on unpaid interest).
• The parties are generally free to agree on a rate, but courts can reduce interest they find unfairly high (unconscionable). Very high rates risk being cut down.
• If a debt is overdue and no rate was agreed, a court may award legal interest (a rate set by law) from the time you demanded payment.
• Penalties for late payment should also be written in the note.

Does It Need a Notary?

A Promissory Note is valid and enforceable when signed, without a notary. Notarizing it makes it a public document (one the courts accept without further proof of signing), so the borrower will find it harder to deny their signature later. It is especially worth doing for large amounts or if the borrower lives far away.

If the loan is backed by a mortgage on land (Real Estate Mortgage) or on a car or other movable property (Chattel Mortgage), the mortgage must be notarized and registered so that it holds against other people too, not just the borrower.

Documentary Stamp Tax

Under Section 179 of the Tax Code, as amended by Republic Act No. 12214 (the Capital Markets Efficiency Promotion Act, 2025), Loan Agreements and Promissory Notes pay documentary stamp tax (DST) of 0.75% of the amount. The BIR applies this rate to loans made from 1 July 2025; before that it was ₱1.50 for every ₱200. For loans with a term under one year, the tax is reduced in proportion to the number of days. Only one DST is charged on either the Loan Agreement or the Promissory Note issued for the same loan.

Under Section 201 of the Tax Code, a document that should have been stamped cannot be recorded or used as evidence in court until the tax is paid. Compute it with the documentary stamp tax calculator.

Government fees can change. Always check the current amount with the office before you pay. Last checked October 8, 2026.

When the Borrower Does Not Pay

1. Talk first. A short extension or new payment plan, written and signed, is often the fastest fix.
2. Send a Demand Letter. Under Article 1169 of the Civil Code, a borrower is legally late (in delay) from the time you demand payment, unless the note says no demand is needed. A written demand also starts the clock for interest and shows the court you tried. See Demand Letters and the Demand Letter template.
3. Barangay conciliation. If you and the borrower live in the same city or municipality, you usually must go through the barangay first. See barangay conciliation.
4. Small claims court. For money claims up to ₱1,000,000, small claims in the first-level courts (the municipal and city trial courts) is fast and simple, and lawyers are not allowed to appear for the parties. See small claims.

Collect the amount within the legal deadline. A case based on a written contract generally must be filed within ten years under Article 1144 of the Civil Code; one based on an oral agreement, within six (Article 1145).