Payment of principal not made until interests are paid

Persida Acosta

Persida Acosta

Dear PAO,
Is it valid to charge penalties and interests when an agreement has been made of paying P10,000 for 6 months while a request for amnesty is being processed?

I was granted a loan by a bank, but I failed to settle because our house was burned. From that point on, I never received any form of communication with them until six months ago when somebody sent me a message through Facebook demanding to collect over P200,000. I attempted to negotiate, as I am unable to fulfill the amount. I requested to pay P10,000 a month until the amount is cleared. They agreed for the P10,000 a month plan, and mentioned that they will request for maximum amnesty if I will be able to pay continuously for six months, which I did. After six months, they gave me the amount which they said contains the maximum amnesty and it still showed over P200,000. I’ve noticed that my monthly payment is deducted from the interest and penalty but not on the principal. Thank you and God bless!

Dear MM,
On your first question, it is still possible for the bank to still charge your loan with penalties and interests as long as there is no existing agreement that they will suspend charging these. From your letter, you stated that the bank agreed to process your loan for a maximum amnesty if you have consistently paid P10,000 a month for six (6) months. It did not appear in your letter whether they promised to suspend all charges while they processed your application for an amnesty. It appears in your letter that the bank was willing to let you pay P10,000 a month in order to reconsider demanding from you the entire amount that you owed them. Otherwise, the bank would have easily filed a civil action for collection of sum of money against you.

On the issue of interest, Article 1253 of the Civil Code states that, “If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered.” Unless you have an agreement that the payments you made were to be applied to the principal, the said provision on payment will apply.

We hope that we were able to enlighten you on the matter. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to


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