Filipinos who rely on small, short-term loans are set to benefit from lower borrowing costs as the Securities and Exchange Commission (SEC) tightens the ceiling on interest rates and fees charged by lending and financing companies.

Under SEC Memorandum Circular No. 14, Series of 2025, the effective interest rate on unsecured loans of up to P10,000 will drop to 12 percent per month from 15 percent today. 

Nominal interest rates will be limited to 6 percent per month, late-payment penalties capped at 5 percent, and total charges — interest, fees, and penalties — cannot exceed 100 percent of the amount borrowed. 

Trapping borrowers in repeat debt cycles

The SEC said the new limits are designed to curb runaway charges that often trap low-income borrowers in repeat debt cycles.

SEC chairperson Francis Lim said the regulator sought to protect consumers while ensuring lenders remain viable. 

“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,” he said.

The new caps will apply to general-purpose loans with terms of up to four months starting 1 April 2026, covering new, renewed, or restructured loans.

Penalties

The SEC warned it will penalize companies that try to skirt the rules — such as through repackaged loans, split amounts, disguised fees, or simulated collateral. 

Violators face a P50,000 fine for the first offense; at least double the fine and/or a 60-day suspension for the second; and revocation of their certificate of authority and incorporation for the third.

To ensure they remain aligned with consumer needs and regulatory developments, the Commission said it will periodically review the ceilings.