Commercial Law: Sample Interest Calculation

On March 10, 2024, X incurred a loan from Y amounting to Php 100,000 with payment due in one year. The loan was subject to an interest rate of 12% per annum. 

On March 11, 2026, Y filed a Complaint for Sum of Money against X.

How much will X pay on March 11, 2029?
Periods:
March 11, 2025 = due date
March 11, 2029 = 5 years from loan; 4 years from default; 3 years from judicial demand

Formula
Total Amount Due = Principal + IMI + ICI + IIMI + IICI 

Monetary Interest
IMI = Principal x Rate x Time
IMI = (Php 100,000) x (12% p.a.) x (5 years)
IMI = Php 60,000

Compensatory Interest (See Nacar)
ICI = Principal x Rate x Time
ICI = (Php 100,000) x (6% p.a.) x (4 years)
ICI = Php 24,000

Interest on Monetary Interest 
IIMI = Monetary Interest x Rate x Time
IIMI = [(Php 100,000) x (12% p.a.) x (3 years)] x (6% p.a.) x (3 years)
IIMI = [Php 36,000] x (6% p.a.) x (3 years)
IIMI = Php 6,480

Interest on Compensatory Interest
IICI = Compensatory Interest x Rate x Time
IICI = [(Php 100,000) x (6% p.a.) x (3 years)] x (6% p.a.) x (3 years)
IICI = [Php 18,000] x (6% p.a.) x (3 years)
IICI = Php 3,240

Total Amount Due = Principal + IMI + ICI + IIMI + IICI 
Total Amount Due = Php 100,000 + Php 60,000 + Php 24,000 + Php 6,480 + Php 3,240
Total Amount Due = Php 193,720

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On March 7, 2024, X incurred a loan amounting to Php 100,000 with payment due in one year. The loan was subject to an interest rate of 5% per annum, and in case of default, a penalty charge of 10% p.a. of the total amount due will be applied.

Relevant provision:

NCC, Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

  1. When the obligation or the law expressly so declare; or
  2. When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or
  3. When demand would be useless, as when the obligor has rendered it beyond his power to perform.

A. How much will X pay on March 8, 2025?

Given:
Principal = Php 100,000
Monetary Interest Rate = 0.05/year
Time = 1 year

Calculation:
Monetary Interest = Principal x Rate x Time
Monetary Interest = (Php 100,000) x (0.05/year) x (1 year) 
Monetary Interest = Php 5,000

Total Amount Due = Principal + Monetary Interest
Total Amount Due = (Php 100,000) + (Php 5,000) 
Total Amount Due = Php 105,000


B. How much will X pay upon demand on March 9, 2025?
Given:
Principal = Php 100,000
Monetary Interest Rate = 0.05/year
Compensatory/Penalty Interest Rate = 0.10/year of the amount due
Time = 1 year

Calculation:
Monetary Interest = Principal x Rate x Time
Monetary Interest = (Php 100,000) x (0.05/year) x (1 year) 
Monetary Interest = Php 5,000

Compensatory Interest= Amount Due x Rate x Time
Compensatory Interest= (Principal + Monetary Interest) x Rate x Time
Compensatory Interest= (Php 100,000 + Php 5,000) x (0.10/year) x (1/365 year) 
Compensatory Interest= Php 28.77

Total Amount Due = Principal + Monetary Interest + Compensatory Interest
Total Amount Due = (Php 100,000) + (Php 5,000) + (Php 28.78)
Amount Due = Php 105,028.78


C. How much will X pay upon extrajudicial demand on March 9, 2025 if no penalty was stipulated?
Nacar v. Gallery Frames, Inc., G.R. No. 189871, August 13, 2013: When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

Given:
Principal = Php 100,000
Monetary Interest Rate= 0.05/year
Compensatory/Penalty Interest Rate = 0.06/year 
Time = 1 year

Calculation:
Monetary Interest = Principal x Rate x Time
Monetary Interest = (Php 100,000) x (0.05/year) x (1 year) 
Monetary Interest = Php 5,000

Compensatory Interest= Amount Due x Rate x Time
Compensatory Interest= (Principal + Monetary Interest) x Rate x Time
Compensatory Interest= (Php 105,000) x (0.06/year) x (1/365 year) 
Compensatory Interest= Php 17.26

Total Amount Due = Principal + Monetary Interest + Compensatory Interest
Total Amount Due = (Php 100,000) + (Php 5,000) + (Php 17.26)
Amount Due = Php 105,017.26


D. How much will X pay on March 8, 2026?
Given:
Principal = Php 100,000
Monetary Interest Rate = 0.05/year
Compensatory/Penalty Interest Rate= 0.10/year of the amount due
Time from loan agreement = 2 years
Time from default = 1 year

Calculation:
Monetary Interest = Principal x Rate x Time
Monetary Interest = (Php 100,000) x (0.05/year) x (2 years) 
Monetary Interest = Php 10,000

Compensatory Interest= Amount Due x Rate x Time
Compensatory Interest= (Principal + Monetary Interest) x Rate x Time
Compensatory Interest= (Php 100,000 + Php 10,000) x (0.10/year) x (1 year) 
Compensatory Interest= Php 11,000

Total Amount Due = Principal + Monetary Interest + Compensatory Interest
Total Amount Due = (Php 100,000) + (Php 10,000) + (Php 11,000)
Amount Due = Php 122,000

E. How much will X pay on March 8, 2026 if no penalty was stipulated?
Given:
Principal = Php 100,000
Monetary Interest Rate= 0.05/year
Compensatory/Penalty Interest Rate = 0.06/year 
Time = 2 years

Calculation:
Monetary Interest = Principal x Rate x Time
Monetary Interest = (Php 100,000) x (0.05/year) x (2 years) 
Monetary Interest = Php 10,000

Compensatory Interest= Amount Due x Rate x Time
Compensatory Interest= (Principal + Monetary Interest) x Rate x Time
Compensatory Interest= (Php 100,000 + Php 10,000) x (0.06/year) x (1 year) 
Compensatory Interest= Php 6,600

Total Amount Due = Principal + Monetary Interest + Compensatory Interest
Total Amount Due = (Php 100,000) + (Php 10,000) + (Php 6,600)
Amount Due = Php 116,000

F. How much will X pay upon extrajudicial demand on March 10, 2026?
Given:
Principal = Php 100,000
Monetary Interest Rate = 0.05/year
Compensatory/Penalty Interest Rate= 0.10/year of the amount due
Time = 2 years

Calculation:
Monetary Interest = Principal x Rate x Time
Monetary Interest = (Php 100,000) x (0.05/year) x (2 years) 
Monetary Interest = Php 10,000

Compensatory Interest= Amount Due x Rate x Time
Compensatory Interest= (Principal + Monetary Interest) x Rate x Time
Compensatory Interest= (Php 100,000 + Php 10,000) x (0.10/year) x (2 year) 
Compensatory Interest= Php 22,000

Total Amount Due = Principal + Monetary Interest + Compensatory Interest
Total Amount Due = (Php 100,000) + (Php 10,000) + (Php 22,000)
Amount Due = Php 132,000


G. How much will X pay upon extrajudicial demand on March 10, 2026 if no penalty was stipulated?
Given:
Principal = Php 100,000
Monetary Interest Rate= 0.05/year
Compensatory/Penalty Interest Rate = 0.06/year 
Time = 2 years

Calculation:
Monetary Interest = Principal x Rate x Time
Monetary Interest = (Php 100,000) x (0.05/year) x (2 years) 
Monetary Interest = Php 10,000

Compensatory Interest= Principal x Rate x Time
Compensatory Interest= (Php 100,000) x (0.06/year) x (2 years) 
Compensatory Interest= Php 12,000

Total Amount Due = Principal + Monetary Interest + Compensatory Interest
Total Amount Due = (Php 100,000) + (Php 10,000) + (Php 12,000)
Amount Due = Php 122,000



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