Theft By Any Other Name

[duratanium]

I can imagine this has been covered before but I cannot find the topic and wanted to vent my spleen to a degree...

Now I am in a better position to understand my g/f way of life and finances I am not surprised she and others are struggling to make ends meet as the banks and moneylenders rip them off.

She pays 3% per month on a loan secured against land. So for land valued at 90k B she pays 36,000 B interest per year and at the end of the year she pays an extra 20,000 off the capital. Making a total of 56,000 B for a secured loan of 90,000 B.

A rip off???

That was my line of thinking until I discover friends and family are paying an average of 10% per month on loans up to 20,000 B

No wonder the rich are getting richer and the poor staying poor.

[Prakanong]

Has anyone not tried a Grameen or (Rural) Bank in Thailand?

The model is to lend to the women as well as they tend to be more responsible.

[GuestHouse]

Like wise in the UK, 150 years ago the Friendly and Cooperative Societies (Building Societies etc) broke the bank monopoly on lending money to normal working people and in doing so laid the foundations of the huge Personal Wealth Britain enjoys today.

However the foundation of these societies was 'Collectivism'.

So don't expect such forward thinking to kick off in Thailand any day soon.

If a Thai isn't paying 3% per month to a bank, they are just as likely paying 4% to a member of their own family.

[steveromagnino]

Like wise in the UK, 150 years ago the Friendly and Cooperative Societies (Building Societies etc) broke the bank monopoly on lending money to normal working people and in doing so laid the foundations of the huge Personal Wealth Britain enjoys today.

However the foundation of these societies was 'Collectivism'.

So don't expect such forward thinking to kick off in Thailand any day soon.

If a Thai isn't paying 3% per month to a bank, they are just as likely paying 4% to a member of their own family.

all my staff are paying like 6%; 8%; 3%; MLR etc for their house mortgages?

As am I.

There is no problem with getting cheap loans here. Problem is when people without the capacity to repay loans start borrowing.

Then....4% is not even the highest I've heard of.

[smartecosse]

plenty of people the world over pay far higher %'s than that to money lenders all over the world

[Gary A]

If someone would challenge the money lender they would find out that by law the lender can collect a maximum of one and a half percent per month. My wife helped out a friend by buying her loan from a shark and loaning her the money for the one and a half percent per month maximum. My wife is not a real trusting person when it comes to money, so they then took the land paper to the amphur and my wife has her name on the back of the chanote as the mortgage holder. The lady has five years to pay the money back and failing that the land will belong to my wife. I think what will happen is that the lady will go back to the shark at the end of the five years and borrow money to pay my wife. The shark is likely to eventually end up with the land.

Loan sharks do not have their name on the land paper. They just hold the paper as if it was theirs. When the ignorant owner can't pay the money back, the owner signs off and the shark owns the land. It's illegal but that's the way it works.

EDIT - ADDED - The lady was paying seven percent per month to the shark.

Edited June 4, 2007 by Gary A

[LivinLOS]

I was chatting with a bar girl I knew who had unsecured loans from one of the local sharks.. On unsecured money it ended up that she paid 5 for 4 on a 4 week rotation.. Anything unpaid piled into the next 4 weeks rotation.. at 20% every 4 weeks it adds up fast.. I have heard of the 5 for 4 on 4 weekly described as the 'Chinese system'..

Other than this she was a pretty sharp lass, shrewd in a street smart way.. Yet she saw nothing wrong in 20% each 4 weeks.. Its the instant gratification of money now, live for today, mai pen rai, fatalism etc that all plays into it.. Borrow money to play lucky numbers etc !!

[blizzard]

no offense los.

but you cannot say the bargirl is street smart................isnt it an oxmoron kind of thing.

she smart yet not so.

Edited June 4, 2007 by blizzard

[LivinLOS]

Well if you mean anyone who works in bars must be not street smart I would strongly disagree.. Sure we are not talking about someone smart enough to get themselves out of the bar life trap, pay off Khun Paws gambling debts and secure the family farm, etc etc etc.. But theres more complexity to those famliy ties than simple solutions can be presented.. Sometimes no matter how much the girl could earn it gets taken by family obligations she cannot escape.. Anyway what I meant was this girl wasnt dumb..

She spoke a couple of languages (better than me) other than Thai, had lived in Europe for a bit.. Travelled... Was clearly a step above the average farm girl bar employee.. Yet even as a fairly smart woman she still saw nothing dumb about borrowing money with such awful terms. Just another one that lives entirely for the now the consequences come later.

I know another tale where a young thai guy just had a car repossessed.. He literally had never had money.. Nothing ever before more than 20k or so, a walletfull.. Then one biz angle kicked off and after a high season he had one or two hundred k baht.. The first thing he went and did was to buy the maximum car honda would give him on the drip, not wait to see how business was over low season, wonder if his luck would hold, shop for a second hand motor, keep any rainy day fund.. Nope he just ran out and took the most expensive car he could obtain credit for..

After getting behind on the payments.. Causing problems for his family who acted as guarantors.. Losing perhaps 300 - 350k in deposit and a years worth of payments it was repossessed. The 1 years useage cost him dearly.

I know a mia farang who been given some kind of store cards with 0% interest for 6 months.. She just buys stuff for face that she can never repay herself.. Tho in her case the husband will just have to work harder to pay for his wife.. So whose the fool there ?? Literally buying a second plasma / LCD TV for the bedroom.. 42incher and 5.1 system downstairs.. A gyms worth of work out equipment she doesnt use.. a few PSP's for kids who cant work out how to use them.. All on credit.. The womans actual income is from a few rental bikes, maybe 10 - 15k a month incoming and shes dropping 100k on flat screen TV's !!

I have to say I think the thai mindset of live for today, karma will sort it out, mai pen rai and dont think too mutt.. All mean that they have really bad credit practices. Then again I was taught to be shit scared of credit and if I cant buy something now to save until I could, that was the fastest way to afford something not pay for the use of someone elses money.

[soundman]

Most people in almost every soceity on the planet really just don't realise how expensive lending money can be. Especially when the money is used to buy a depreciating asset that generates no income or profit.

Whether it be a car loan in Aussie at 12% per year on a car that depreciates 50% in the first three years.

Or a thai bar worker who borrows at 5% per month for a mobile phone that depriciates 60% in a year.

I'm no accountant, but I still get educated people asking me to do the figures on these types of purchases all the time. Even well educated people are often amazed at how quickly they lose money.

I have a staff member who two years ago bought a 21" TV. Cash price 4,900B. Credit price 6,000B + interest at 5% per month for two years. All told he would have to pay about 18,000B for the TV - this fact was conveniently excluded from the contract. After 5 months of payments the bright spark realises that he has allready paid the value of the TV off & comes to me for a solution. I looked at his contract, showed him he'd been had, & recomended that he give the TV back as it was the colatteral for the loan, & then save up to buy his next one. He agreed.

Cheers,

Soundman.

[teejay]

good post soundman,

many people the world over do not understand loan structures and are therefore taken advantage of (albeit because of their own ignorance -- the info is there).

i stick to the 'cash is king' rule and will not purchase anything if i can't afford it in cash.

IMO, credit cards are for building credit, not for purchasing!

[soundman]

good post soundman,

many people the world over do not understand loan structures and are therefore taken advantage of (albeit because of their own ignorance -- the info is there).

i stick to the 'cash is king' rule and will not purchase anything if i can't afford it in cash.

IMO, credit cards are for building credit, not for purchasing!

Not to say credit is all bad, the business world would be in the stone-age without it. Could you imagine a small garage based start up company like Microsoft without venture capital???

Back to a more realistic eg. I want to expand my small portfolio of rental properties. I borrow $x to buy a property that I can take $y in revenue. When $y is greater than the costs associated with borrowing $x I make a profit & as long as the value of the property appreciates faster than relative inflation then I am on a winner when I go to sell. (a lot of variables not taken into account in this demo.)

Many years ago "negative gearing" used to be the buzz word. What a load of codswallop. Why buy a property to loose money? When there are just as many out there that can make a modest return..

Cheers,

Soundman.

Edited June 4, 2007 by soundman

[teejay]

just to clarify, just because I won't buy something (house, car, condo, etc) if i can't afford it in cash, does not mean that i may borrow x amount from the bank... just knowing that i can close the deal in cash if need be keeps me happy... of course mortgaging at a low rate can surely help free up capital that would otherwise be sunk into, say, a property.

I guess my point is buy what you can afford. Not many people understand this simple concept.

I borrow at 4.72% per annum from my bank in HK on a 400K USD condo. To pay it all in cash would lock up a lot of money that could otherwise be invested elsewhere.... it's 4% per month interest rates that are killing people that don't understand how interest works. Therein lies the real problem: education (or lack thereof) -- the biggest problem in the world today.