Very High interest on Motorbike loan?

[taytee]

So, over a year ago the mum's gf and her nephew in Issan went to buy a motorbike with a loan, I didnt think much of it then because I have financed one motorbike here before and bought one straight up. I just been paying every month 2,400 assuming for a regular wave 110 which is usually 40-45k baht it would be about 18 months to pay off. 

I then inquire with the girlfriend to find out all the details how much balance is left on it, then after looking at the invoice we use to pay every month its GLPCL Grouplease PCL (never answers emails, call center doesnt even give straight answers but they said usually this type of loan would be 3 years.) He didnt even tell me about my account how much was left or anything he said he had to call another company.

 

So a motorbike that costs 44,000 baht would end up being 86,000 over 3 years, basically can buy 2 motorbikes for that price.. At this point would be better to just pay it off right away, but I have heard shady things about this company after looking at translated google reviews. My question is has anyone had any dealing with this loan company and also to let people know to avoid them and just settle with the big banks, which makes me think why her mom didnt finance with one of them anyway.. I basically knew all this stuff after the fact they bought it.

Edited January 13, 2020 by taytee

[steven100]

3 minutes ago, taytee said:

let people know to avoid them and just settle with the big banks,

They cannot access loans with the big banks. Usually these folks are not regular wage earners over past years so the banks won't touch them, that's why they go to second tier finance companies .... hence a higher interest rate.  Your figures for the motorbike seem about correct ....  a loan of around 45-55k is usually double with interest.  TIT ... 

[taytee]

1 minute ago, steven100 said:

They cannot access loans with the big banks. Usually these folks are not regular wage earners over past years so the banks won't touch them, that's why they go to second tier finance companies .... hence a higher interest rate.  Your figures for the motorbike seem about correct ....  a loan of around 45-55k is usually double with interest.  TIT ... 

I thought there was something in place where there was a limit to the interest rates for loans here? Or are they just not followed?

[ukrules]

19 minutes ago, taytee said:

I thought there was something in place where there was a limit to the interest rates for loans here? Or are they just not followed?

http://library.siam-legal.com/thai-law/civil-and-commercial-code-loans-section-650-656/

 

Section 654. Maximum Interest is 15% per year

 

Interest shall not exceed 15% per year; when a higher rate of interest is fixed by the contract, it shall be reduced to 15% per year.

Section 655. Personal loans – No Compound Interest Allowed

 

Interest shall not bear interest. The parties to a loan of money may, however, agree that the interest due for not less than one year shall be added to the capital, and that the whole shall bear interest, but such agreement must be made in writing.

(Compound Interest Allowed at Financial Institutions.)

[jackdd]

That's a normal interest rate for a small bike loan. Effectively you pay about 30% interest per year, so after 3 years finance you could have nearly bought two bikes.

15% interest are the maximum allowed by law, but the companies just add "loan fees" which make up the other 15%, like this they can legally charge 30%.

Credit card companies do the same.

[fxe1200]

I have seen loan contracts with an effective interest rate of almost 78%. The interest was not stated, just the amount borrowed and the number and amount of monthly installments.

 

This is a great tool to find out:   https://vindeep.com/Calculators/EMICompare.aspx

 

Regular Thais though sign anything in their desperation to find some cash.

[Andycoops]

16 hours ago, steven100 said:

They cannot access loans with the big banks. Usually these folks are not regular wage earners over past years so the banks won't touch them, that's why they go to second tier finance companies .... hence a higher interest rate.  Your figures for the motorbike seem about correct ....  a loan of around 45-55k is usually double with interest.  TIT ... 

My local Honda dealer was selling a Honda Moove for 52000 baht cash or 1800 baht a month for 36 months = 64800 baht with a 1500 baht up front deposit. 

[Mick501]

Girlfriend caught in the same trap.  50k loan which it turns out has 28% interest.   She pays off the interest only of 1200b per month.  Looking at refinancing options, however banks require a letter of income.   She has a market stall so self employed.  Even the regular deposits to her account were not sufficient proof.

 

Trying to find other options but they seem non existent.  Thought it may be good to learn some financial literacy and possibly build a credit history, but dare say it will end with me having to pay out the loan.

[Deerculler]

Will a Honda dealer let a farang buy a motorbike on hire purchase?

[cornishcarlos]

The only time I will ever not pay cash up front, is if it's a 0% deal. We did that on our Ford Ranger, otherwise I'll pay cash thanks ????

[RichardColeman]

Agreed 100% seems about right. UK high streets has companies you can get fridges and tv's that you can pay small amounts off that usually end up about 100% extra if not more. See no reason why Thailand would not equally take advantage of poor people

[Gilltom]

2 hours ago, fxe1200 said:

I have seen loan contracts with an effective interest rate of almost 78%. The interest was not stated, just the amount borrowed and the number and amount of monthly installments.

 

This is a great tool to find out:   https://vindeep.com/Calculators/EMICompare.aspx

 

Regular Thais though sign anything in their desperation to find some cash.

Simple enough to work just times the amount monthly by how many months u pay or better still look at bottom line 

[Proper person]

20 hours ago, ukrules said:

 

Section 654. Maximum Interest is 15% per year

 

Interest shall not exceed 15% per year; when a higher rate of interest is fixed by the contract, it shall be reduced to 15% per year.

Section 655. Personal loans – No Compound Interest Allowed

 

The secret is in the wording, "Hire Purchase." 

The person is basically renting the bike for 36 months and on the 36th month can decide to purchase it for a nominal fee. 

 

There is no interest at all charged. It is what it is stated as in the contract. An agreement to hire it and option to purchase on the last rental payment. 

 

[Sydebolle]

Well, it boils down to a completely overpriced loan of money and to sweeten the deal they throw in a bike!

Look, dont get me wrong but the old saying "cash is king" remains still valid. If there is not enough cash then dont buy it. Thais, ignoring this as well, are overburdened with debts everywhere, be it mortgages on houses or credits on cars, bikes, holidays plus of course the long overdue credit card payments. 

[rech]

No wonder why the poor are poorer and the rich are richer...

 

 

[BritManToo]

23 hours ago, taytee said:

So a motorbike that costs 44,000 baht would end up being 86,000 over 3 years, basically can buy 2 motorbikes for that price.

It's entirely normal Honda pricing. Price is x2 over 3 years.

My kid recently bought a Click 150i, cash price 62k, with 3 years credit 125k.

 

Let them do what they want, it's their money, I ain't contributing any part of it.

Edited January 14, 2020 by BritManToo

[CharlieH]

Many Thais do not do the math, they just look at the "down" and monthly figure and can they pay that. They do not calculate at all. This is why most of these places advertise 1.2% or 1.5% but that's per month! NO annual figure is stated usually.

So again no calculation of what its actually going to cost them. Another reason why its rare to get a cash discount as they actually want and prefer the buyer to do it on credit.

Then they add ALL the interest/fees etc upfront in the agreement and no discount at all for early settlement. (based on my experience).

[jaideedave]

46 minutes ago, CharlieH said:

Many Thais do not do the math, they just look at the "down" and monthly figure and can they pay that. They do not calculate at all. This is why most of these places advertise 1.2% or 1.5% but that's per month! NO annual figure is stated usually.

So again no calculation of what its actually going to cost them. Another reason why its rare to get a cash discount as they actually want and prefer the buyer to do it on credit.

Then they add ALL the interest/fees etc upfront in the agreement and no discount at all for early settlement. (based on my experience).

 

[steven100]

6 hours ago, Deerculler said:

Will a Honda dealer let a farang buy a motorbike on hire purchase?

no .... i doubt it 

[Pib]

The legal max interest rate on a loan in Thailand varies...the 15% max rate only applies to certain types of loans.  Other types of loans can have higher interest rates.

 

https://www.tilleke.com/resources/thailand-new-law-interest-overcharging

Quote

Nonetheless, 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 B.E. 2523 (1980) and the BOT’s notification subject on interest, fees, surcharge for personal loan.

 

[DJ54]

Financing a moto here is insane. But as been said if they buyer can 

afford the monthly payment they’ll buy. You also see trucks driving around the villages repo some of them. 

 

Papa wheeled up on a new wave and I said you bought that? He has monthly payments.. uh and he doesn’t work except once in a while odd jobs. He had it about 3 months the nephew and niece riding all over ... maintenance what maintenance.. they came a got

the moto followed by a demand notice from attorney.....

 

I didn’t bail him out not my choice to buy.....  me and the wife have 

4 motos. One the wife let the nephew and niece ride and practically destroyed it, I asked why is your moto in front of the clinic office? .... it broke down and they nephew left it there. Wife 

didn’t know it’d been there 3 days....

 

they know now better than ask me to borrow and keys are never left in mine...

[KKr]

23 hours ago, Gilltom said:

Simple enough to work just times the amount monthly by how many months u pay or better still look at bottom line 

try XNPV function in a spreadsheet for somewhat more accurate results. 
A loss in 3 years is worth less then a cash out today ????  , at least in finance, whereas to the wallet it is the same.