Bank Loan - early repayment problem

[Shadychris]

I have come across a situation that just doesn't seem to add up.

 

My partner took out a loan of 790,000 baht back around 2011 from Kasikorn Bank. The repayment period is 180 months - 15 years.

Monthly repayments are 6,700 + 400 'insurance' = 7,100 baht.

Total repayable 1,278.000 

 

First thing I find odd there is that the bank are holding a chanote as security against the loan - so why also are they charging  a total of 72,000 in insurance payments??

Is that normal practice in Thailand?

 

The bank is stating that the amount still outstanding to pay is around 720,000 - which seems to add up given the repayment rate of 7,100\month over the remaining time of the loan.

 

So I asked my partner to find out how much the payment would be to settle the balance now - as there should clearly be a saving in both interest and 'insurance' if the loan is settled tomorrow instead of in 8 years time.

However the bank has come back with a figure of 920,000!!

Given that 558,000 has already been paid back that wound make a total repayment of around 1,479,000 - an extra 200,920 (around 16%) to settle early!

 

To me this just seems completely insane - I am not familiar with how bank loans work in Thailand - but I'm struggling to grasp any possible concept of having to pay more to settle early than you would to let the repayments run their course.

 

Can anyone offer up any experience or advice about this?

 

 

 

 

[tonray]

What was the interest rate on the loan ?

 

Using that interest rate we can produce an amortization schedule of what payments should be on a standard loan. What does it say in the loan agreement that she signed  concerning early repayment ?

[Shadychris]

3 minutes ago, tonray said:

What was the interest rate on the loan ?

 

Using that interest rate we can produce an amortization schedule of what payments should be on a standard loan. What does it say in the loan agreement that she signed  concerning early repayment ?

Hi Tonray,

Thanks for the quick reply.

The interest rate I am told was 4.8%  with the loan being made of 2 parts principle and insurance.

I have limited info as I am currently in the UK until Easter - but even if I could see the loan agreement right now it would mean nothing to me as I cant read Thai anyway ...

I could try and get a scan copy of it and then post it here though if you can read Thai?

 

Thanks

Chris

[Halfaboy]

Would it be possible that the bank comes up with a specification of the 920.000 baht repayment. That would make it easier to analyse.

[tonray]

2 minutes ago, Shadychris said:

Hi Tonray,

Thanks for the quick reply.

The interest rate I am told was 4.8%  with the loan being made of 2 parts principle and insurance.

I have limited info as I am currently in the UK until Easter - but even if I could see the loan agreement right now it would mean nothing to me as I cant read Thai anyway ...

I could try and get a scan copy of it and then post it here though if you can read Thai?

 

Thanks

Chris

I cannot read Thai...but your friend I assume can ! What does it say about early payment penalties and fees ?

 

Here is a schedule (without insurance) of what a 4.8% loan for 15 years should look like:

 

$6,165 Monthly Payment   $319,749 Total Interest Paid

$1,109,749 Total of 180 Payments   Dec, 2025 Pay-off Date

 

 

 

Amortization Schedule

Date	Interest	Principal	Balance
Jan, 2011	$3,160	$3,005	$786,995
Feb, 2011	$3,148	$3,017	$783,977
Mar, 2011	$3,136	$3,029	$780,948
Apr, 2011	$3,124	$3,041	$777,907
May, 2011	$3,112	$3,054	$774,853
Jun, 2011	$3,099	$3,066	$771,787
Jul, 2011	$3,087	$3,078	$768,709
Aug, 2011	$3,075	$3,090	$765,619
Sep, 2011	$3,062	$3,103	$762,516
Oct, 2011	$3,050	$3,115	$759,400
Nov, 2011	$3,038	$3,128	$756,273
Dec, 2011	$3,025	$3,140	$753,133
2011	$37,116	$36,867	$753,133
Jan, 2012	$3,013	$3,153	$749,980
Feb, 2012	$3,000	$3,165	$746,815
Mar, 2012	$2,987	$3,178	$743,637
Apr, 2012	$2,975	$3,191	$740,446
May, 2012	$2,962	$3,203	$737,242
Jun, 2012	$2,949	$3,216	$734,026
Jul, 2012	$2,936	$3,229	$730,797
Aug, 2012	$2,923	$3,242	$727,555
Sep, 2012	$2,910	$3,255	$724,300
Oct, 2012	$2,897	$3,268	$721,032
Nov, 2012	$2,884	$3,281	$717,750
Dec, 2012	$2,871	$3,294	$714,456
2012	$35,307	$38,676	$714,456
Jan, 2013	$2,858	$3,307	$711,149
Feb, 2013	$2,845	$3,321	$707,828
Mar, 2013	$2,831	$3,334	$704,494
Apr, 2013	$2,818	$3,347	$701,147
May, 2013	$2,805	$3,361	$697,786
Jun, 2013	$2,791	$3,374	$694,412
Jul, 2013	$2,778	$3,388	$691,024
Aug, 2013	$2,764	$3,401	$687,623
Sep, 2013	$2,750	$3,415	$684,208
Oct, 2013	$2,737	$3,428	$680,780
Nov, 2013	$2,723	$3,442	$677,338
Dec, 2013	$2,709	$3,456	$673,882
2013	$33,409	$40,574	$673,882
Jan, 2014	$2,696	$3,470	$670,412
Feb, 2014	$2,682	$3,484	$666,929
Mar, 2014	$2,668	$3,498	$663,431
Apr, 2014	$2,654	$3,512	$659,919
May, 2014	$2,640	$3,526	$656,394
Jun, 2014	$2,626	$3,540	$652,854
Jul, 2014	$2,611	$3,554	$649,300
Aug, 2014	$2,597	$3,568	$645,732
Sep, 2014	$2,583	$3,582	$642,150
Oct, 2014	$2,569	$3,597	$638,553
Nov, 2014	$2,554	$3,611	$634,942
Dec, 2014	$2,540	$3,626	$631,317
2014	$31,418	$42,565	$631,317
Jan, 2015	$2,525	$3,640	$627,677
Feb, 2015	$2,511	$3,655	$624,022
Mar, 2015	$2,496	$3,669	$620,353
Apr, 2015	$2,481	$3,684	$616,669
May, 2015	$2,467	$3,699	$612,970
Jun, 2015	$2,452	$3,713	$609,257
Jul, 2015	$2,437	$3,728	$605,529
Aug, 2015	$2,422	$3,743	$601,786
Sep, 2015	$2,407	$3,758	$598,027
Oct, 2015	$2,392	$3,773	$594,254
Nov, 2015	$2,377	$3,788	$590,466
Dec, 2015	$2,362	$3,803	$586,663
2015	$29,329	$44,654	$586,663
Jan, 2016	$2,347	$3,819	$582,844
Feb, 2016	$2,331	$3,834	$579,010
Mar, 2016	$2,316	$3,849	$575,161
Apr, 2016	$2,301	$3,865	$571,296
May, 2016	$2,285	$3,880	$567,416
Jun, 2016	$2,270	$3,896	$563,521
Jul, 2016	$2,254	$3,911	$559,609
Aug, 2016	$2,238	$3,927	$555,683
Sep, 2016	$2,223	$3,943	$551,740
Oct, 2016	$2,207	$3,958	$547,782
Nov, 2016	$2,191	$3,974	$543,808
Dec, 2016	$2,175	$3,990	$539,817
2016	$27,138	$46,845	$539,817
Jan, 2017	$2,159	$4,006	$535,811
Feb, 2017	$2,143	$4,022	$531,789
Mar, 2017	$2,127	$4,038	$527,751
Apr, 2017	$2,111	$4,054	$523,697
May, 2017	$2,095	$4,070	$519,627
Jun, 2017	$2,079	$4,087	$515,540
Jul, 2017	$2,062	$4,103	$511,437
Aug, 2017	$2,046	$4,120	$507,317
Sep, 2017	$2,029	$4,136	$503,181
Oct, 2017	$2,013	$4,153	$499,029
Nov, 2017	$1,996	$4,169	$494,859
Dec, 2017	$1,979	$4,186	$490,674
2017	$24,839	$49,144	$490,674
Jan, 2018	$1,963	$4,203	$486,471
Feb, 2018	$1,946	$4,219	$482,252
Mar, 2018	$1,929	$4,236	$478,015
Apr, 2018	$1,912	$4,253	$473,762
May, 2018	$1,895	$4,270	$469,492
Jun, 2018	$1,878	$4,287	$465,205
Jul, 2018	$1,861	$4,304	$460,900
Aug, 2018	$1,844	$4,322	$456,578
Sep, 2018	$1,826	$4,339	$452,240
Oct, 2018	$1,809	$4,356	$447,883
Nov, 2018	$1,792	$4,374	$443,509
Dec, 2018	$1,774	$4,391	$439,118
2018	$22,428	$51,555	$439,118
Jan, 2019	$1,756	$4,409	$434,709
Feb, 2019	$1,739	$4,426	$430,283
Mar, 2019	$1,721	$4,444	$425,839
Apr, 2019	$1,703	$4,462	$421,377
May, 2019	$1,686	$4,480	$416,897
Jun, 2019	$1,668	$4,498	$412,399
Jul, 2019	$1,650	$4,516	$407,884
Aug, 2019	$1,632	$4,534	$403,350
Sep, 2019	$1,613	$4,552	$398,798
Oct, 2019	$1,595	$4,570	$394,228
Nov, 2019	$1,577	$4,588	$389,640
Dec, 2019	$1,559	$4,607	$385,033
2019	$19,898	$54,085	$385,033
Jan, 2020	$1,540	$4,625	$380,408
Feb, 2020	$1,522	$4,644	$375,764
Mar, 2020	$1,503	$4,662	$371,102
Apr, 2020	$1,484	$4,681	$366,421
May, 2020	$1,466	$4,700	$361,722
Jun, 2020	$1,447	$4,718	$357,003
Jul, 2020	$1,428	$4,737	$352,266
Aug, 2020	$1,409	$4,756	$347,510
Sep, 2020	$1,390	$4,775	$342,734
Oct, 2020	$1,371	$4,794	$337,940
Nov, 2020	$1,352	$4,814	$333,127
Dec, 2020	$1,333	$4,833	$328,294
2020	$17,244	$56,739	$328,294
Jan, 2021	$1,313	$4,852	$323,442
Feb, 2021	$1,294	$4,872	$318,570
Mar, 2021	$1,274	$4,891	$313,679
Apr, 2021	$1,255	$4,911	$308,769
May, 2021	$1,235	$4,930	$303,839
Jun, 2021	$1,215	$4,950	$298,889
Jul, 2021	$1,196	$4,970	$293,919
Aug, 2021	$1,176	$4,990	$288,929
Sep, 2021	$1,156	$5,010	$283,920
Oct, 2021	$1,136	$5,030	$278,890
Nov, 2021	$1,116	$5,050	$273,840
Dec, 2021	$1,095	$5,070	$268,770
2021	$14,460	$59,523	$268,770
Jan, 2022	$1,075	$5,090	$263,680
Feb, 2022	$1,055	$5,111	$258,570
Mar, 2022	$1,034	$5,131	$253,439
Apr, 2022	$1,014	$5,152	$248,287
May, 2022	$993	$5,172	$243,115
Jun, 2022	$972	$5,193	$237,922
Jul, 2022	$952	$5,214	$232,709
Aug, 2022	$931	$5,234	$227,474
Sep, 2022	$910	$5,255	$222,219
Oct, 2022	$889	$5,276	$216,942
Nov, 2022	$868	$5,298	$211,645
Dec, 2022	$847	$5,319	$206,326
2022	$11,539	$62,444	$206,326
Jan, 2023	$825	$5,340	$200,986
Feb, 2023	$804	$5,361	$195,625
Mar, 2023	$782	$5,383	$190,242
Apr, 2023	$761	$5,404	$184,838
May, 2023	$739	$5,426	$179,412
Jun, 2023	$718	$5,448	$173,964
Jul, 2023	$696	$5,469	$168,495
Aug, 2023	$674	$5,491	$163,004
Sep, 2023	$652	$5,513	$157,490
Oct, 2023	$630	$5,535	$151,955
Nov, 2023	$608	$5,557	$146,398
Dec, 2023	$586	$5,580	$140,818
2023	$8,475	$65,508	$140,818
Jan, 2024	$563	$5,602	$135,216
Feb, 2024	$541	$5,624	$129,592
Mar, 2024	$518	$5,647	$123,945
Apr, 2024	$496	$5,669	$118,275
May, 2024	$473	$5,692	$112,583
Jun, 2024	$450	$5,715	$106,868
Jul, 2024	$427	$5,738	$101,130
Aug, 2024	$405	$5,761	$95,369
Sep, 2024	$381	$5,784	$89,586
Oct, 2024	$358	$5,807	$83,779
Nov, 2024	$335	$5,830	$77,949
Dec, 2024	$312	$5,853	$72,095
2024	$5,260	$68,723	$72,095
Jan, 2025	$288	$5,877	$66,218
Feb, 2025	$265	$5,900	$60,318
Mar, 2025	$241	$5,924	$54,394
Apr, 2025	$218	$5,948	$48,446
May, 2025	$194	$5,971	$42,475
Jun, 2025	$170	$5,995	$36,479
Jul, 2025	$146	$6,019	$30,460
Aug, 2025	$122	$6,043	$24,416
Sep, 2025	$98	$6,068	$18,349
Oct, 2025	$73	$6,092	$12,257
Nov, 2025	$49	$6,116	$6,141
Dec, 2025	$25	$6,141	$0
2025	$1,888	$72,095	$0

 

 

 

[Shadychris]

OK thanks again.

From your amoritization table and the figures it does rather look like the monthly repayments she is making are a bit excessive - if the rate is actually 4.8%....

 

My bigger concern though is the fact that the bank are asking more for early settlement! You mention yourself 'penalties' for early settlement.

I have had quite a few loans in the UK and there has never been a penalty to settle up early - but rather I have ended up paying less than if I had let the loan run its course...

 

I'll try and get some more info about what the agreement says.

 

 

 

[Shadychris]

Also is it usual for a Thai bank to also require insurance policy on a loan when it is already secured against a chanote??

[Banana7]

A very important factor in a loan is how the interest is calculated. What is the frequency of compounding the interest? Is the interest compounded with every payment, quarterly, semi-annually, or annually?

 

In some countries, there is difference in the way interest on a loan and a mortgage is calculated. For example, in Canada, mortgages, can only have interest compounded semi-annually. Loan interest can be done most anyway.

 

Loans are usually very simple to deal with, since the interest is compounded with every payment. Therefore, a loan at 6%, with monthly payments and compounding simply requires using a rate of 0.5% per month (6%/12 = 0.5%).

 

For a semi-annual compounding mortgage if you are quoted a rate of 6% on a mortgage, the mortgage will actually have an effective annual rate of 6.09%, based on 3% semi-annually. However, you make your interest payments monthly, so your mortgage lender needs to use a monthly rate based on an annual rate that is less than 6%. Why? Because this rate will get compounded monthly. Therefore, we need to find the rate that compounded monthly, results in an effective annual rate of 6.09%. Mathematically, this would be:

(1+r_M)¹²-1 = 0.0609

r_M = (1.0609)^1/12

r_M = 0.493862…%

Notice, that the annual equivalent of his rate is slightly less than 6%, at 5.926% (0.493862 x 12 = 5.926%). In other words, 5.926% compounded monthly is 6.09% annually.

 

Also understand the insurance policy. Does it say if the borrower dies, the loan is forgiven, therefore the property reverts to the estate, free and clear? or maybe if the borrower is in an accident, unable to work, payments will be made by the insurance company until the borrower is able to work again? Maybe it just says, if she defaults on the loan, the insurance company will guarantee the bank loses nothing - collateral is sold, bank gets everything owed to it.

 

 

 

 

 

 

[Halfaboy]

Calculation of interest rate could be slightly affected by the timing of the payments, i.e. at the beginning or the end of the month. 

[lopburi3]

It has been over 4 decades but believe Thai base interest payment on full original principle until loan is paid in full - but can not remember exact process.   

[Monomial]

I've never heard of any bank in Thailand doing a fixed rate loan over 15 years. It really sounds like this is a mortgage, which means it is almost certainly a variable rate loan with an introductory rate for 3 years of 4.8%, after which it will vary by the bank's Minimum Retail Rate or Minimum Loan Rate plus or minus some percentage. This should be listed in the contract. The "total repayable" for mortgages is just an estimate.

 

In this case, the bank will set the monthly payments so that the loan is expected to be paid back in about 3/4 of the length of the loan, say 12 years if interest rates are constant. That way, if the interest rate adjusts upward, the monthly payments remain the same and the time is extended. If the loan reaches the full 15 years, then in the rare case interest rates rose substantially, the unpaid portion is due as a balloon payment. It is possible with the way Thai adjustable rate mortgages work that the total to be repaid exceeds the remaining monthly payments. Again, in this case the difference would be due as a balloon payment after the loan was over. It is not a prepayment penalty.

 

The bank should be sending monthly statements showing the unpaid balance on the loan. The statement should also show the current interest rate being charged, or it can be easily calculated by looking at the amounts applied to principal and the amounts applied to interest.

 

Many banks will require mortgage insurance in order to approve the loan for some borrowers. Sometimes it is absolutely required as a condition of approval, other times the bank employees just lie in order to get the commission. Either way,  it is clear insurance was purchased, so there is nothing you can do about it.

 

Again, you need to get your hands on a statement so you can see what is going on, but what you have reported here sounds like gibberish. Thai banks just don't operate this way.

 

[thailand49]

Not sure of the loan?  but once a GF had a two year contract for a motorbike, I wanted to pay off the contract but was told the final payment would be the same regardless.

Regarding 400 baht, this I believe a required insurance life policy?  if she dies the loan is paid off?  thus the 400 baht.

[natway09]

Caveat Mentor!!!!

[sikishrory]

My last loan in Australia was same. I tried to pay 10 grand in a couple of months rather than a few years and was threatened with a penalty.

It was a good lesson though as if the loan was bigger (eg, mortgage) then it would be a considerable pain in bum.

Quite common when borrowing money apparently as they want you in for the long haul and paying that interest as long as possible. The loan isn't by any means granted to do you a favour but is for them to make money off you.

[Shadychris]

1 hour ago, natway09 said:

Caveat Mentor!!!!

I think what you actually mean is 'caveat emptor'......

Always easy to be wise after the event,  but nonetheless I'm sure my partner will appreciate your advice.

[Shadychris]

Thanks to all who have given their time and effort in responding. Some useful and helpful info above.

The more I think about this the more I'm minded to agree with Monomial that this is not a simple 'Personal Loan' such as I have experience of with UK banks, but rather it is a re-mortgage on land\property - hence why the bank are holding the chanote as well as covering it by insurance.

I will get a copy of the original agreement and also enquire about monthly statements - pretty sure they are not being provided...

I'm also suggesting my partner to make an appointment with the Kasikorn branch manager, and to take along a friend who is a bit more business savvy.

I understand that there is some recourse to the Thai Ombudsman service in the case of any wrongdoing by the bank - but ultimately I suspect that she just signed up to a very costly loan, due to both the length of repayment and her financial status...

[sikishrory]

2 hours ago, Shadychris said:

Thanks to all who have given their time and effort in responding. Some useful and helpful info above.

The more I think about this the more I'm minded to agree with Monomial that this is not a simple 'Personal Loan' such as I have experience of with UK banks, but rather it is a re-mortgage on land\property - hence why the bank are holding the chanote as well as covering it by insurance.

I will get a copy of the original agreement and also enquire about monthly statements - pretty sure they are not being provided...

I'm also suggesting my partner to make an appointment with the Kasikorn branch manager, and to take along a friend who is a bit more business savvy.

I understand that there is some recourse to the Thai Ombudsman service in the case of any wrongdoing by the bank - but ultimately I suspect that she just signed up to a very costly loan, due to both the length of repayment and her financial status...

If you ever feel you need to goto the ombudsman make sure to try the kasikorn head office first. I contacted them via email and fb message to complain that they sold me 2 insurances when opening an account there. They were like pitbulls with a bone! They were emailing me and calling me and the branch in question was calling me trying to persuade me to tell them to drop it. I tried but they were intent on something. 

I did write to them in Thai and English initially so not sure whether that helped. But props to them.

Edited December 20, 2017 by sikishrory

[naboo]

The way I see it:

 

Sheborrowed 790,000B

 

Interest so far is 130,000B (based on what the bank have said)

 

So far she has paid (ignoring insurance) 6700Bx80(ish) months = 496,000B

 

Total payable is 790,000B + 130,000B = 920,000B

 

Minus 496,000B paid so far leaves 424,000B to pay.

 

Banks here communicate in very simple terms that we don't expect. My mortgage (GSB) had an early payment clause in the first 3 years when interest was reduced. Now I overpay with no penalty.

[blackcab]

On 20/12/2017 at 5:09 PM, Shadychris said:

I'm also suggesting my partner to make an appointment with the Kasikorn branch manager, and to take along a friend who is a bit more business savvy.

I understand that there is some recourse to the Thai Ombudsman service in the case of any wrongdoing by the bank - but ultimately I suspect that she just signed up to a very costly loan, due to both the length of repayment and her financial status...

 

There's nothing to discuss. She signed a contract with a reputable bank and the interest rate is not out of the ordinary for Thailand.

 

If you want to help just pay the loan amount each month. If things go wrong with your relationship before the end of the loan period then you will have paid less money. If you're still together then you've lost nothing.

 

Understand that once the loan is paid off it is highly likely another mortgage will be taken out.

Edited December 23, 2017 by blackcab

[BEVUP]

On 12/20/2017 at 8:19 PM, naboo said:

The way I see it:

 

Sheborrowed 790,000B

 

Interest so far is 130,000B (based on what the bank have said)

 

So far she has paid (ignoring insurance) 6700Bx80(ish) months = 496,000B

 

Total payable is 790,000B + 130,000B = 920,000B

 

Minus 496,000B paid so far leaves 424,000B to pay.

 

Banks here communicate in very simple terms that we don't expect. My mortgage (GSB) had an early payment clause in the first 3 years when interest was reduced. Now I overpay with no penalty.

Now this is the most plausible 

Your GF is telling you the total amount owed 

Also they are charging a small % of interest on the Life Ins. since she is paying that over 15 yrs 

Also pending on what the loan was for IE: Car ( as that figure seems to hint at one ) the interest rate may be higher then just a housing loan

 

PS : I just took took out a loan (with Toyota ) 50% of the car value & was told if I pay early I would only pay 50% of the remaining Interest 

Edited December 23, 2017 by BEVUP