Short answer. It becomes theirs. A person who receives a loan of money acquires ownership of it and is only bound to pay back an equal amount of the same kind and quality. You no longer own the specific bills or coins you handed over; you hold a right to repayment instead.
What the law says
A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality.
Civil Code, Article 1953 — Mutuum Transfers Ownership. Read the full provision →
Why a money loan works differently from lending an object
The law treats a loan of money, or any other fungible thing, one that can be replaced by an equal amount of the same kind and quality, differently from lending a specific item you expect back unchanged. When you lend money, the person who receives it acquires the ownership thereof. You are not lending them your particular banknotes to hand back later; you are transferring ownership of that money to them outright.
What you get in exchange for that ownership
In place of the money itself, you get a personal right against the borrower: they are bound to pay to the creditor an equal amount of the same kind and quality. So your position after lending money is that of a creditor with a right to repayment of an equivalent sum, not an owner who can point to specific bills or coins and say those particular ones are still legally yours.
How this differs from leaving something with someone for safekeeping
This ownership transfer is a defining feature of a loan of money, called a mutuum, and it sets a loan apart from an arrangement like a deposit, where the depositor typically keeps ownership and the depositary is meant to return the very thing entrusted. With a money loan, the borrower is free to spend, use, or otherwise deal with the money as their own, precisely because it is now theirs, subject only to the obligation to pay back an equal amount.
What this means if the borrower does not pay you back
Since you no longer own the money itself, a borrower who fails to repay has not deprived you of your property in the way a thief would; instead, they have failed to fulfill a personal obligation to pay you an equal amount. That distinction shapes what kind of claim you actually have against them, a claim for payment of the sum owed, rather than a claim to recover specific money as your own property.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Romulado J. Bawasanta vs. People of the Philippines/Rodolfo G. Valencia vs. People of the, G.R. No. 219300 / G.R. No. 219323 / G.R. No. 219343, November 17, 2021 — read the decision on LawPhil →
- Spouses Ramon Sy and Anita Ng, Richard Sy, Josie Ong, William Sy and Jackeline De Lucia vs. Westmont Bank (Now United Overseas Bank Philippines) and Philippine Deposit Insurance Corporation, as Assignee of United Overseas Bank Philippines, G.R. No. 201074, October 19, 2016 — read the decision on LawPhil →
- Spouses Salvador Abella and Alma Abella vs. Spouses Romeo Abella and Annie Abella, G.R. No. 195166, July 8, 2015 — read the decision on LawPhil →
- Land Bank of the Philippines vs. Lamberto C. Perez, et al, G.R. No. 166884, June 13, 2012 — read the decision on LawPhil →