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

[SS1]

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). 

[SheungWan]

When someone says trust is not an issue, the implication is that all the risk will be on the side of the lender. You want to go with that?

[JaiLai]

Lend money lose friends

[SteveK]

If someone in Thailand asks me to lend them some money, then I know that one of two arguments will ensue:

 

1. I don't lend the money, and have to deal with an angry Thai person. No money lost.

 

2. I lend the money, then when I ask for it back, I have to deal with an angry Thai person. The money I loaned is lost.

 

Please, stick to number one, keep your money and your sanity.

 

Never, ever lend money to people in Thailand, unless you are willing to write the sum off and forget about ever collecting it. Nothing against the Thais, they just have a different attitude to money, loans, and paying people back (ie they always try to avoid paying the money back, especially if an idiot farang was the one who loaned it).

 

 

[Inn Between]

I knew a couple (Thai woman / farang man) who used to lend money on a semi-loan shark basis (3% per month on a 1-year term, collecting the interest monthly and the original balance on the termination date). They only did it with a contract, sufficient property put up as collateral and a policeman involved who would put some serious pressure on anyone who defaulted. The people going into the loans knew this cop was involved, and that helped to filter out the true deadbeats who decided that just using the usual tactic of simply ignoring the debt or creating a conflict to justify never talking to the person again wouldn't work. They did well working within those parameters, and I would make sure that the condo is definitely on the line and will be lost if the person defaults. 

 

And BTW, I would say the trust is ALWAYS an issue when loaning money. Some people can be amazingly convincing of good intention and sincerity when in need, but if something goes wrong......

 

 

 

[mstevens]

My rule is the same as other posters - don't lend money in Thailand, period.

 

The one exception would be if the borrower was willing to both give me and sign over to me an asset worth more than the loan, an asset that could be easily liquidated i.e. gold, or an asset such as a car of far greater value than the amount loaned. That way if the loan wasn't repaid, the asset could be sold and the lender would not lose. But no Thai is ever going to agree to that, are they!

[lannarebirth]

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.

[Curt1591]

300,000 baht on credit cards? 



 

[Sticky Wicket]

Wonder how many Thais are in this situation with loans!

I can feel the house of cards teetering

[Puchaiyank]

These kinds of loans are a bad risk...likely the irresponsible financial behavior will not change...

[cornishcarlos]

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 ????

[Beggar]

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. 

[Vacuum]

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.

[mike787]

It is NOT a loan...your giving it away...Friendship is friendship, business is business...problems occur when those distinctions are confused and merged. 

[BritManToo]

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 (thank you).

Please re-title this thread "How to quickly lose two friends"

You should also take the time to learn the different meanings between 'borrow' and 'lend'.

[legend49]

i get this lending request often from my de facto of 13 years. Its always a one way loan just remember that Thais forget alot, bit like lending expensive watches.

[LukKrueng]

11 hours ago, SS1 said:

We have a good friend (Person A) who is in a poor financial situation.............

Another friend (Person B) just inherited a decent amount of money 

I assume A + B are Thai nationals and you, the OP, are a foreigner and all 3 live here in Thailand. Is that correct?

If so, what's the point of a non Thai to ask for Thai legal advise regarding Thai people on a foreigners' forum of non legal experts?

 

[stephenterry]

4 hours ago, Curt1591 said:

300,000 baht on credit cards? 



 

This is a key observation. Clearly person A is a spendthrift, and that behaviour won't change when new money is injected into her life. For that reason alone, I would put my inheritance money into 3 year GSB bonds and tell A that the money is tied up elsewhere.

 

In that way B and A can remain friends. Sorry to be pessimistic, but it's almost impossible to change behaviour that is clearly off the rails.

[me4175]

I have lent money to others many times. Some I've lost, most I've got back, but often with huge delays.

In my experience, if someone racked up a large amount of credit card debt, they will do it again. So giving them access to other forms of credit, especially without solid collateral, is not a good idea, for both sides. Even if they cancel their credit cards, they can and will easily get new ones issued.

So better forget about it, don't make their problem your or someone else's problem.

[spidermike007]

Unless you know this person very well, and have lent money to them in the past, and gotten it back, do not consider a loan of such a large amount. And if you are hellbent on doing it, get sufficient collateral. Like the title to her car. For starters. Something that does not require you to go to court, should she die, default, or just decide to not pay the loan back. Collateral is the name of the game in Thailand. The banks require it. You should too. 

[AJBangkok]

Take a step back and look at the root cause of the problem. The person is in this position because they were financially irresponsible. Of course they are remorseful that they are in this situation but more than likely they are remorseful that their credit has dried up and now the party is over and they are forced to restrict their life style because of the repayment burden.

 

Before lending the money ask yourself are you really helping them or are you enabling them to continue being financially irresponsible and wrecking their life as the result will be to put them deeper in financial debt. At the same time your interest payments will become profit sourced from their misery. Can you live with that.

 

Are you 100% confident that when your money is used to pay off all the credit card debt, your borrower won’t succumb to temptation and start running them up again until next thing you know the limits are reached and the person you are trying to help is now 600k in debt rather than 300k. Will that person thank you or hate you.

 

Dont lend the money. There are government organizations that help consolidate debt and provide councilling, you putting the person in the same position with access to credit without addressing the cause of the problem will just ensure that the same result is inevitable. 

[BigFun]

Use a kai faak (Sale deposit) contract with the condo used as collateral/guarantee. Make sure there is 300k+ equity in the condo.

[hellohello123]

A lot of talk about thais and their irresposnbile attitude towards money, which is fair enough,

 

however, if this is the case, what is the lending market like in thailand,

 

eg if this attitude is prevalent, if a bank gave a credit card to a thai, than they must know that the chances of defaults are high

 

do they simply have higher interest rates to cover bad debts?

do they have a far stricter/harsher bankruptcy/default process?

do they only give credit to very credit worthy people?

 

serious question fellows

[mercman24]

that just proves this person is no good with money, DONT< i recently lent 100,000 to a *friend* signed contracts, on 1 MAY she had 70,000 back from a previous business, (i seen the contract) now it would appear the first person is in dispute with her, and will not pay (in fact she is suing her for 400,000 for lost business) so there is me at the back of the queue, for sfa, my debtor say she will sell land to pay me back not holding my breath, no option but to chill out, and see the outcome, oh her pos farang boyfriend has been giving me some verbals, ungrateful bar steward, still i have all the proof,  lol

[AJBangkok]

6 minutes ago, hellohello123 said:

A lot of talk about thais and their irresposnbile attitude towards money, which is fair enough,

 

however, if this is the case, what is the lending market like in thailand,

 

eg if this attitude is prevalent, if a bank gave a credit card to a thai, than they must know that the chances of defaults are high

 

do they simply have higher interest rates to cover bad debts?

do they have a far stricter/harsher bankruptcy/default process?

do they only give credit to very credit worthy people?

 

serious question fellows

Honestly maybe the attitude of this board is more a reflection on the type of Thai people they associate with rather than Thai society as a whole.

[SS1]

3 hours ago, cornishcarlos said:

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 ????

Thanks, this is good advice. Both, Person A and B are good friends whom I've known and trusted for 5/20 years. I am assisting person A because I have some responsibility/cause in the reason why she had to take the loan in the first place (long story). 

 

41 minutes ago, LukKrueng said:

I assume A + B are Thai nationals and you, the OP, are a foreigner and all 3 live here in Thailand. Is that correct?

If so, what's the point of a non Thai to ask for Thai legal advise regarding Thai people on a foreigners' forum of non legal experts?

 

Person B is a foreign national and all of us live in Thailand. 
 

33 minutes ago, spidermike007 said:

Unless you know this person very well, and have lent money to them in the past, and gotten it back, do not consider a loan of such a large amount. And if you are hellbent on doing it, get sufficient collateral. Like the title to her car. For starters. Something that does not require you to go to court, should she die, default, or just decide to not pay the loan back. Collateral is the name of the game in Thailand. The banks require it. You should too. 

I know both very well and have personally lent money to both in the past and always had every satang paid back as promised. All of us three equally help each other at difficult times like good friends do. 
 

23 minutes ago, BigFun said:

Use a kai faak (Sale deposit) contract with the condo used as collateral/guarantee. Make sure there is 300k+ equity in the condo.

This is good advice, there is +300k equity in the condo. 

 

 

 

 

5 hours ago, Curt1591 said:

300,000 baht on credit cards? 

Mainly condo furniture bought on a 0% interest deal, but 0% interest period ended earlier than expected. 

[connda]

If the person is a Thai, then consider any money that you loan that person to be a gift that will never be repaid.  Of course you can sign forms and do it all 'legally', but you can not bleed a rock, especially are rock that keeps using credit even when they are buried in debt.  So you'll provide Person A with a loan, that person will breath a sigh of relief, and now out from under all that debt - will probably start the cycle over again because Person A wants 'stuff' and 'things' but has the burden of a debt that they own Person B. 
So - just gift Person A 300,000 THB.  If you loan them that amount they'll end up being an enemy.  Want to kill that 'friendship?'  Loan them money! 

[Vacuum]

7 minutes ago, SS1 said:

there is +300k equity in the condo. 

So why did the bank/s refuse her a loan?

[1FinickyOne]

there is a reason why banks and credit card companies charge high interest rates... if this person is already in hock it is not likely to get better... 

 

an unsecured loan based on trust only with no collateral is usually a very bad idea. 

[4MyEgo]

12 hours ago, SS1 said:

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.

Have you asked yourself why you want to lend her the money, her credit debt is not your problem, if she owes money on her credit cards at insane interest rates, the interest rates are not the problem, it's her maxing out her credit cards, meaning she cannot handle her credit cards, as a lot of people cannot do.

 

Regardless of what you write up, unless you have something of value to fall back onto if she defaults, you have a piece of paper worth nothing.

 

If the banks won't lend her anymore money, it's not because of the credit card interest she is paying, it's because she is already a risk, no doubt the have 1st mortgage on her condo, with the others seeing not enough value in it to go 2nd mortgagee.

 

It's ok to say NO, lending only pushing people further over the edge in my opinion, that's why I never lend to anyone, make your bed, lay it it, hard words, but the wiser.