SEC lowers interest rate cap for small loans to 6% monthly

The Securities and Exchange Commission (SEC) has lowered the monthly nominal interest rate cap for unsecured, general-purpose loans of up to P10,000 with repayment terms of up to four months to 6%.

The effective interest rate ceiling, which includes nominal interest plus all other fees and charges but excludes penalties, has been reduced to 12% per month.

Previously, the Monetary Board and the SEC allowed a maximum effective interest rate of 15% per month.

Penalties for late or missed payments are limited to 5% per month of the outstanding amount due.

A total cost cap limits the sum of all interest, fees, charges, and penalties to the total amount borrowed.

These new rules, anchored on the Financial Products and Services Consumer Protection Act, will take effect for new, renewed, or restructured loans starting April 1, 2026.

SEC Chairperson Francis Lim stated the recalibrated cap offers a balanced framework promoting consumer protection and the viability of financing and lending companies.