Quick answer

When a court awards a sum of money, that award generally earns legal interest, and the rules on the rate and the reckoning point were clarified by the Supreme Court in the Nacar ruling, which adopted the monetary authority's adjustment of the legal interest rate. The prevailing legal interest rate is six percent (6%) per annum. The application of interest depends on the nature of the obligation. First, for a loan or forbearance of money, goods, or credit, the interest due is that which is stipulated in writing; in the absence of a stipulation, the legal interest of 6% per annum applies, computed from default, that is, from judicial or extrajudicial demand. Second, for an obligation not constituting a loan or forbearance of money (for example, an award of damages for breach of contract or a quasi-delict), interest on the amount of damages may be imposed at the discretion of the court at 6% per annum, but no interest runs until the demand can be established with reasonable certainty; where the demand is established with reasonable certainty, interest runs from the time of judicial or extrajudicial demand, and where it cannot be so established at the time of demand, interest runs only from the date of the judgment of the court (because only then is the amount reasonably ascertained). Third, and importantly, once the judgment awarding a sum of money becomes final and executory, the total amount of the judgment (whatever the source of the obligation) earns legal interest of 6% per annum from such finality until its full satisfaction; this final-stage interest is treated as a forbearance of credit. The historical note is that the legal rate used to be higher (12% for loans/forbearances before mid-2013), so awards spanning that period may involve a change of rate. So a monetary judgment earns 6% legal interest, with the reckoning point depending on whether it is a loan (from demand) or another obligation (from demand if certain, else from judgment), and in all cases 6% runs from finality until full payment.

Money Awards Earn Legal Interest

A court's money award generally earns legal interest. Per the Nacar ruling, the prevailing legal rate is 6% per annum, with the reckoning point depending on the nature of the obligation.

Loans vs. Other Obligations

Interest From Finality

Once the judgment is final and executory, the total amount earns 6% per annum from finality until full satisfaction, treated as a forbearance of credit. (Historically the rate was 12% for loans before mid-2013.)

Practical Takeaways

Frequently Asked Questions

What is the legal interest rate on a money judgment? The prevailing legal interest rate is six percent (6%) per annum, as clarified in the Nacar ruling following the monetary authority's adjustment of the rate.

When does interest run on a loan? For a loan or forbearance of money, the stipulated interest applies. In the absence of a stipulation, legal interest of 6% per annum runs from default, that is, from judicial or extrajudicial demand.

When does interest run on damages for breach or quasi-delict? At 6% per annum in the court's discretion, running from judicial or extrajudicial demand if the amount is established with reasonable certainty, and otherwise only from the date of the judgment when the amount is reasonably ascertained.

Does interest run after the judgment becomes final? Yes. Once the judgment awarding a sum of money becomes final and executory, the total amount earns legal interest of 6% per annum from finality until its full satisfaction, treated as a forbearance of credit.

This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.

If you have questions about your rights or options under Philippine law, our firm is available to assist. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.