Short answer. The difference is ownership and whether it must be free. Lending a specific thing (commodatum) keeps you as owner and must be free of charge. Lending money or another consumable (mutuum) transfers ownership to the borrower and can carry interest if you both agree to it. Civil Code Article 1933 sets out both.
What the law says
By the contract of loan, one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum.
Civil Code, Article 1933 — Loan: Commodatum and Mutuum. Read the full provision →
What the law says
In commodatum the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to the borrower.
Civil Code, Article 1933 — Loan: Commodatum and Mutuum. Read the full provision →
Two contracts under one label of "loan"
Article 1933 defines both in a single sentence: by the contract of loan, one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum. What separates them is what you hand over: a specific, non-consumable thing to be used and returned itself, or money or another consumable to be repaid in an equivalent amount.
Whether payment can be charged for it
The two are treated differently on cost. Commodatum is essentially gratuitous — the lender cannot charge for letting you use the thing. Simple loan, by contrast, may be gratuitous or with a stipulation to pay interest, meaning a money loan can lawfully carry interest if the parties agree to it, while a loan of a specific thing to use cannot be turned into a paid arrangement without changing what kind of contract it actually is.
Who owns the thing while the loan runs
This is the deeper structural difference: in commodatum the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to the borrower. Lend your car and it is still your car throughout — the borrower only has the use of it. Lend cash and the specific bills are no longer yours the moment they change hands; the borrower owns that money outright and simply owes you an equivalent amount back.
Why it matters which one you actually have
Because ownership does not shift in commodatum, what the borrower must return is the very thing lent, not a substitute of equal value. In mutuum, since ownership transfers, the borrower cannot return the exact same money and instead must repay the same amount of the same kind and quality. If you are unsure which kind of arrangement you are in, look at what you actually handed over and whether you expected that specific item back or only an equivalent amount, then have the agreement reviewed.
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.
- Roberto L. Yupangco and Regina y De Ocampo vs. O.J. Development and Trading Corporation, G.R. No. 242074, November 10, 2021 — read the decision on LawPhil →
- Raquel Estipona (Lelandlord E. Sto. Domingo) and Sps. Alberto Co and Lulu Co, G.R. No. 207407, September 29, 2021 — read the decision on LawPhil →
- Rex Sorongon vs. People of the Philippines, G.R. No. 230669, June 16, 2021 — read the decision on LawPhil →
- Atty. Leonardo Florent O. Bulatao vs. Zenaida C. Estonactoc, G.R. No. 235020, December 10, 2019 — read the decision on LawPhil →