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BANGKOK 26 June 2019 17:39
SS1

Giving a loan to a friend - advice needed, how to do it legitimately

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Hi,

 

We have a good friend (Person A) who is in a poor financial situation, with a loan of around THB 300,000 with various credit cards. She is paying an insane amount of interest on the credit cards and unable to get another bank loan since she already has a mortgage for a condo she owns and is renting out. Person A has a secure job and a good salary, and the rental income pays for the monthly payments towards the mortgage. 

Another friend (Person B) just inherited a decent amount of money and is willing to lend the needed amount to Person A to be paid back monthly over a period of 24 months with a reasonable interest rate. This would be a massive help to Person A, whilst Person B will be able to make some more money compared to just keeping his money in a savings account. 

Trust is not an issue, in this case, however, Person B wants to be covered in case Person A e.g. has an accident and passes away. Therefore, we are considering the following:
 

  1. An official contract made between Person A and Person B, defining the loan amount, duration, frequency of paying back as well as interest. Would such contract be legal in Thailand - is it even legal to borrow an individual money with interest, or is this considered being a "loan shark"? 
  2. A will written by Person A defining that if she was to die, X amount of her assets must be transferred to person B. 
  3. Person A also has life insurance, but she was doubtful that it's possible to make it/a part of it go into any other one's name than her relatives. If not, would it be possible to also make a will to define that X amount of her life insurance sum must be paid to Person B in case of an accident? 

 

Would this sound legitimate within Thai law? 


ps. I'm sure there are many negative stories about borrowing money to people in Thailand, but as mentioned trust is not an issue in this case. So I am not looking for comments about whether it's a bad idea to borrow someone money in the first place (thank you). 

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How much equity does the borrower have in their condo? If it is considerable, have them take out a second mortgage with the new lender. Don't get into any of that "if they should die" stuff. What you want is collateral should they fail to repay, dead or alive. If the equity in the condo does not give "at least" a 50% (35% better) LTV ratio then the lender should pass on giving a loan.

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I believe there is a legal way to do this, which involves the condo title being put down as collateral. That's if there is sufficient value in the condo.

I'm sure it is a standard loan contract, probably available from the Amphur ??

 

Are you related to Person B ? 

 

You always risk losing friends when loans go bad though.. It's taken me 10+ yrs to get my wife to understand this, although she still like helping people out if she can 🙂

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How I see it - in the end you are in the money lending business by collecting interest payments. Don't think that this is legal. On top of it you have no work permit. 

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11 hours ago, SS1 said:

So I am not looking for comments about whether it's a bad idea to borrow someone money in the first place

Yes it is. That's why they can't get a loan in a bank.

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