Short answer. From judicial demand. Article 2212 provides that interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. So unpaid interest does compound, but only once the claim is brought to court, not from the day it fell due.
What the law says
Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.
Civil Code, Article 2212 — Compounding of Interest. Read the full provision →
Judicial demand is the starting line
The date the article fixes is not the day the interest fell due, and not the day you posted a demand letter. It is the time it is judicially demanded, which points at the bringing of the claim in court. That is a deliberately later and harder date than most creditors assume, and it means arrears of interest sit there earning nothing while extrajudicial demands are repeated. If a debt has been outstanding for years and nothing has ever been filed, the compounding this article allows has simply not begun to run.
It works even where the contract is silent
The clause although the obligation may be silent upon this point is what gives the article its reach. You do not need a compounding provision in the loan or the contract; the law supplies one from the moment of judicial demand. That is unusual, because interest upon interest is otherwise something parties have to agree to expressly. Read it the right way round, though. The article attaches a consequence to going to court; it does not write a term into your agreement. Outside a case, silence in the contract still means no compounding.
What counts as interest due
Only interest that is genuinely due and unpaid can earn interest under this article, so the prior question is always what interest was running in the first place and on what basis. Where the parties stipulated a rate, that stipulation is the source. Where they did not, Article 2209 supplies the indemnity for a money obligation in delay: the interest agreed upon, and in its absence the legal interest. Establish that first layer properly, because a computation that compounds a figure nobody has justified will not survive the first challenge to it.
Two dates control the arithmetic
Both should be documented: when the principal fell into delay, and when the case was filed. Keep the contract or note, every demand you sent with proof of receipt, the ledger of payments received, and the stamped copy of the complaint. Prepare the computation in layers rather than as one figure, showing the principal, the interest that accrued upon it, and the interest on that interest from filing onwards. A clear schedule is worth more than a large number, and it is the thing the other side will be made to answer.
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.
- Lara’s Gifts & Decors, Inc. vs. Midtown Industrial Sales, Inc, G.R. No. 225433, August 28, 2019 — read the decision on LawPhil →
- Tarcisio S. Calilung vs. Paramount Insurance Corporation, et al, G.R. No. 195641, July 11, 2016 — read the decision on LawPhil →
- Jesus T. David vs. Court of Appeals & Honorable Edgardo Cruz, etc., et al, G.R. No. 115821, October 13, 1999 — read the decision on LawPhil →
- Daniel T. So , Substituted By His Heirs, Namely: Jesusa H. So; Danalaine H. So; and Darrien Derrick H. So vs. Food Fest Land, Inc, G.R. No. 261784, April 2, 2025 — read the decision on LawPhil →
Related provisions
- Civil Code, Article 2209 — Interest on Money Obligations
- Civil Code, Article 2210 — Discretionary Interest on Damages