Payment of interest for the loan of money

Whenever I have no court hearings, I spend most of my time, except on weekends and holidays, in my law office, either researching or drafting legal documents.

Oftentimes, while in the office, clients would drop by to consult me about their legal problems.

But, as a matter of office procedure, before allowing clients to speak with me, the office secretary will first conduct a brief and quick interview about their identities and other personal circumstances (for new clients) and the legal problems they intend to consult with me.

She will then relay to me all the information she had gathered.  And I will initially evaluate the client’s legal problem.

She then instructs the client to proceed to my room. Once inside, I ask him to discuss in detail his legal problem.

And, if necessary, I ask some clarificatory questions. Once I figure out with certainty the client’s exact legal problem, this will now serve as my green light to start giving legal advice to him.

When it comes to legal problems which has something to do with the loan of money, the question that clients often ask, or consult with, me involves the payment of interest.

Particularly, if the client happens to be the lender, he would ask, “If I lend money to someone else, say a friend, can I collect interest, in addition to the principal amount loaned, for the use of my money?”

And, if he happens to be the borrower, he would ask, “If I borrow money from someone else, say a relative, can he demand payment of interest, in addition to the principal amount loaned, from me for the use of his money?”

Before I start giving legal advice, I would first throw back to the client two simple, yet very important, questions.

I ask the client, “Is there an agreement for the payment of interest?” And “Is the agreement in writing?”

If his answer to all those questions is a resounding “yes,” then, if he is the lender, he can collect interest, in addition to the principal amount loaned, for the use of his money.

And, if he is the borrower, the lender can demand payment of interest, in addition to the principal amount loaned, from him for the use of his money.

Otherwise, the only amount that may be legally demanded for payment would be the principal amount loaned.

This is in consonance with Article 1956 of the Civil Code of the Philippines, which provides: “No interest shall be due unless it has been expressly stipulated in writing.”

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