Add-on rate or diminishing balance
An add-on rate charges interest on the full amount for every month, even as you pay it down; Credit Peso's own example, for one, uses a monthly flat rate. A diminishing-balance rate charges interest only on what is left each month, as in Home Credit's published example. At the same 3% a month over 4 months on ₱10,000, the add-on rate costs ₱1,200 in interest; the diminishing rate costs less. Switch the rate type above to see the difference for your loan.
The SEC caps on small loans
For unsecured loans of ₱10,000 or less for up to four months from lending and financing companies, SEC MC No. 14 s.2025 caps nominal interest at 6% a month, the effective rate at 12% a month, late penalties at 5% a month on the amount due, and all charges together at the amount borrowed (SEC MC No. 14 s.2025).
Documentary stamp tax on the loan
“On every original issue of debt instruments, there shall be collected a documentary stamp-tax of One peso and fifty centavos (₱1.50) on each Two hundred pesos (₱200), or fractional part thereof, of the issue price of any such debt instruments”, and for such debt instruments with terms of less than one (1) year, the documentary stamp tax to be collected shall be of a proportional amount in accordance with the ratio of its term in number of days to three hundred sixty-five (365) days (RA 10963 (TRAIN) Sec. 55, amending NIRC Sec. 179 (LawPhil)). Work out DST on other documents with the documentary stamp tax calculator, or read how DST works.
The calculator assumes equal payments every 30 days or one payment at the end; a lender's own schedule can differ, and its Disclosure Statement is the figure that binds. For a dispute, contact the lender, then the SEC.
Questions
How do I compute the interest on a loan?
On an add-on (flat) rate, multiply the amount by the monthly rate and the number of months: ₱10,000 at 3% a month for 4 months is ₱1,200. On a diminishing-balance rate, interest is charged only on what you still owe each month, so the total is lower at the same rate.
What is the effective interest rate (EIR)?
It is the rate that counts interest and every fee together, measured on the cash you actually receive and the dates you repay. SEC MC No. 14 s.2025 defines it that way and caps it at 12% a month on small, short loans.
Is there documentary stamp tax on a personal loan?
Yes. NIRC Sec. 179 charges ₱1.50 on every ₱200 of the loan, prorated by days over 365 for terms under a year: about ₱24.66 on ₱10,000 for 120 days.
Which loans does the SEC interest cap cover?
Unsecured, general-purpose loans of ₱10,000 or less with terms of up to four months from lending and financing companies, entered into from Apr 1, 2026. Larger or longer loans, and bank loans, are outside it.