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Home » Thailand in general » Reader question: What is a normal interest rate for lending money?
Reader question: What is a normal interest rate for lending money?
Dear readers,
A cousin of my girlfriend wants to borrow money from us (me) to start a business. It is not a large amount (about 50.000 baht). He wants to pay it off monthly.
What is a normal interest rate for something like this?
Regards,
Egbert
Lending money to family :).
Well, good luck, interest without probably any form of security. Minimum 8%.
Just stick with the bank.
Including action plan, costs and risk analysis.
This data tells you if the loan and interest are viable.
.
In how many installments does he want to pay it back?
An example: I have 500,000 baht on a fixed account for 3 years, I get 1.75% on that.
I would ask for something similar if you want to make money off it.
If he cannot borrow from the bank and has to do so privately, it will probably cost him 5 to 10% interest per month. I have even encountered 20% per month, exorbitant interest rates, even from family.
When I was first here I once lent 75000 baht to an aunt from ta, they had problems with a machine, no money for repair, they would pay back when they had harvested the rice. I did not charge interest, is ultimately related to my girl.
About 5 months later I got it back with three boxes of Chang beer. I thought it was a bit exaggerated because they are otherwise poor people. But then I learned that she also borrowed money from a sister to send her daughter to college and it cost her 5% interest per month.
I think the maximum interest rate for private loans is 7,5% per year, but I don't know if you can lend that as a farang.
So if that cousin is reliable lend it to him so that you don't have a loss from your bank. There are pre-printed forms that lay down the rules in this type of private loan, so you have some certainty when he signs it. You can often get these forms at the local supermarket.
In my experience, among family, a 5% fee is fair.
Please note that it is laid down by law how much interest may be charged.
The Act Prohibiting the Collection of Interest at an Excessive Rate BE 2560 (2017)” on January 15, 2017.
it should be observed that the interest rates permitted by Thai laws can differ. For example, loans for consumption under the Civil and Commercial Code must not exceed 15 percent per year, while loans with commercial banks could be higher, as permitted by specific legislation, such as the Interest Rates for Loans from Financial Institutions Act BE 2523 (1980 ) and the BOT's notification subject on interest, fees, surcharge for personal loan.
Egbert,
I would only lend it if there is collateral, for example a booklet of the motorbike or car or something like that.
50k thb doesn't seem like much to us, but for a Thai that is a lot of monthly wages. Many Thais enthusiastically start a business or trade, but after 2 to 3 months they give up.
I don't know your girlfriend's cousin, of course, but he won't be the first to leave with your 50k. Usual interest is under Thai 2% per month.
But my advice is don't do it, it is all too often "once a gift is a given" and he is such a nice cousin, you certainly don't want to argue with your girlfriend or the family.
Dear Egbert,
If that is done in a fair way, i.e. paid back, I wouldn't charge interest. Remember that if you live in the Netherlands you get 0.01% from the bank and if I'm correct you pay 1,6% to the tax authorities, so you lose annually.
In Thailand, percentages of 10% on the outstanding balance are normal (With loan sharks you pay 10% or more every month).
If the company / small company has a chance of success, lend it out at 0% and request a monthly payment of, for example, 250 baht. Make an agreement that in the event of a payment arrears of 3 months, the outstanding balance is immediately due and payable, of course increased by the statutory interest and collection costs.
Think of it as a micro credit that is also provided by development work / aid agencies
I must warn you about Thai people who want to start a shop, usually the family eats it without paying.
Regards Anthony
With a monthly repayment of 250 Baht p/m, it takes 16 years, even without interest payment, before the loan amount is repaid. Drawing up an agreement that the outstanding amount is immediately due and payable in the event of an arrears of 3 months, means nothing in practice and does not provide any guarantee. To Egbert, the questioner, I should like to put a question in return. Would you also lend 50.000 Baht (€ 1500) to a nephew of yours and what interest would you charge? In view of your question, which interest rate is reasonable, it seems that you have already decided to lend the money to the Thai cousin. Furthermore, € 1500 does not seem like a large amount to you; what is the point of calculating 0%, 5% or, for example, 8% interest? On an annual basis, the difference is negligible. In fact, you provide the loan to help him, repayment is not guaranteed anyway and then consider it a goodwill investment for the future. You don't get rich from it. Although it is not my concern, I wonder, in connection with the way in which the loan will be repaid, whether you are staying in the Netherlands or in Thailand and whether or not you live with your girlfriend.
With private loans to a Thai, the question is always whether you will ever get it back and that is why loan sharks easily want 15-20% per month.
If it weren't for Egbert, how would the cousin have gotten the loan?
I do not know the relationship, but if it is really business, count 5% per month on the outstanding amount and repayment 5000 baht per month. If that is paid off properly, then you surprise the nephew after 8 months with the announcement that you are canceling the last two months. Do you have your money back and are you the cool pear or do you deserve respect.
In the bank you had barely received 200 baht a year and no one was helped with it.
Hello Egbert,
Every bank charges a normal good interest rate.
But the people who cannot borrow money from any bank will borrow from Thais and there the regular interest rate is 5% PER MONTH!!!
So what do you think.....
Shock Dee
John
Moderator: You don't answer the question.
Well, if I have to mention percentages, I would say 5% per year, but also admit that I think the behavior, seriousness and a possible deposit are more important.
Not infrequently, the business that has already started is so lucrative in the beginning that the debtor wants to continue it consistently.
This consistent continuation of a small business, so that it is not immediately given up again, can be achieved if the debtor himself is prepared to provide a surety.
If he can only give a word of confidence, then too often one runs the risk of saying goodbye to his money for good.
My wife lent a relative 7000 Baht, and although it was actually my money and not a large amount, she led the debtor to believe that it was only her own money.
When she asked after a while what the situation was with the agreed repayment, she was told that she should not act like this because, according to the family member's opinion, she had married what she considered to be a wealthy Farang.
It even went so far that the debtor herself played the offended, and stayed away from part of the family.
Because I actually thought it was a pity that this small amount, after my opinion, caused so much tension in one part of the Family, I wanted to talk to her, which was again forbidden to me from the other side.
The person still walks past us offended and without saying hello when we meet by chance, so that in the event of a future loan I am very careful to whom and how I lend something to someone.
Even a donation without good secret can cause bad blood and envy in a family.
If you lend money to someone in Thailand, family or not, you ask a reasonable interest rate of up to about 5% per year. I've always done that. But to be sure that your money will indeed come back, I would require a security. That could be an auti, gold or the title deed of grobd or something like that. It is desirable that you record everything in writing. It may sound a bit suspicious, but experience shows that you should certainly not fail to do this.
my wife says 10%
Moderator: Please just answer the question.
Moderator: Your comment will not be posted because you did not answer the question. The questioner does not ask readers for advice on whether or not to lend money.
The editors do not want to publish my meaningful contribution.
I can only mention an interest rate.
Fine. 20% per month and then you have doubled your money in 5 months,
but you will probably never see a penny again.
All the above contribution about security and contracts etc are laughable.
This is about 1500 euros and I would if this cousin is a nice and smart boy
see it as a gift and if your business goes well you might get something back one day.
Wouldn't you first inquire what kind of company it will be?
What kind of “substantiated” plan can be shown.
If you know the cousin well, I wouldn't ask too much 2 percent pm
Or else consider it written off when lending to Thais, but you have a "karma"!
What is Wisdom in Thailand?
If he can't go to a bank, he pays 6/10% interest per month. If you go absent, 'guys' will come along!!
There is a clear proverb:
“with family you have to walk, don't act”!
So, if you're fairly cash-strapped, donate the money! It stays in the family and hopefully it gives you a nice feeling!
Here in Ubon it is called “THAMBUN”
There are so many factors… say 5% per year. That is more than you receive in savings interest and quite affordable for a loan. But it depends on various factors whether you should sit higher or lower... do you want to make money from it (you shouldn't want to make money from friends)? Would you like to do him a favor? Does he have collateral? How bad is it if you don't get all the money back? Etc
I like Johnny BG's suggestion. Just some interest, something that he can really pay off monthly and, if all goes well, cancel part of it in the end.
Or just talk to him, what does he suggest? And then come to a solution together.
From day 1 when I came to Thailand (now 11 years ago) I have always taken the position never to lend money to family. Donate money. So you can "lend" money to the cousin, but charge the same interest as a bank would charge. Then immediately write it off for yourself (consider as a gift) and if repayment and interest are paid in accordance with the agreement, I would treat that cousin to dinner afterwards. If nephew could offer security (car, moped, etc.) then I would accept that.
If a bank gives you say 1,5% p/y in interest on your deposit, you can safely ask for 5%. All higher percentages fall into the category of "usury interest" and then you know for sure that nephew cannot meet it.
Between 5 and 10% per month is common among Thais.
Assume that the loan cannot be repaid. In any case, you have received the interest.
That is why Thais also charge (in our eyes) exorbitant interest rates.
After a good year, you will have your investment back yourself and you can further cancel the loan.
Everyone happy 🙂
HI,,, as an alternative answer,, interest among family is not really important, a deposit is always an important factor, if there is not one and you still want to lend it, why not step in for 50% and partly becoming the owner, that way you are a partner and also have insight into all actions, if it goes well you also have 50% of the net profit… Think about it.
H..
You decide whether you charge interest or not.
Don't forget that it is illegal in Thailand to grant loans to individuals as "farang".
Your girlfriend can.
So asking interest = lending money
Making money temporarily available as help is not an offence.
(provide some form of guarantee in all possible positions (could be gold, pledge a channot, etc....)
Of course, no one falls over such matters as long as no problems arise.
Covering yourself a bit if you do proceed to that help is of course never a bad idea.
In my 18 years of Thailand I have done that a few times - never had any problems.
greetings
Guy