Lending The Family Money.

[duratanium]

The long time g/f has asked me to lend her sister and her brother in law 100,000 Baht so they can get on and finish the house they are currently slowly building, that they desperately need instead of them, 2 kids and the mother living in the corrugated tin house they currently live in.

I have been offered a chanote (spelling) for half a rai of land near a main road that I have long understood to be worth 200,000+ Baht.

I am asked to loan the money at 2% p.m. over a period of 2 years.

There will be a written agreement (same as used by the money lenders) between myself and the sister including the fact that if the family fail to pay for 3 months in total that they will forfeit the land to me.

I understand a Farang cannot own land but am unsure as to the legalities of where I stand if I agree to the loan and they fail to pay or make payments. Also as we never know the future for certain and relationships do break down and that could lead to failed payments so in regard to that I would like to know :-

Can I take the land temporarily and sell it within a certain period of time?

Can I sell on the debt?

Or are there any other options available with regards to the land itself.

As an aside, if I lend say 50,000 against the papers for a car would the same apply in that instance if they fail to pay the debt for 3 month per the written agreement?

Thanks

[Morden]

Generally speaking, I would advise against entering into such agreements unless you are legally married to the lady. On the other hand, to refuse altogether would put you and, perhaps, your girlfriend in a bad light if it was thought that you had the money.

Also, a loan to a family member probably amounts to a gift because, in the event of a default, you might well be under pressure to let them off the hook to avoid loss of face. If the sister and her husband haven't been able to raise this amount of money in a while, the chances are that they will not be able to keep up loan repayments either.

If you can and wish to make a gift, that's fine. You may find that the family shows its gratitude in whatever way it can. If you want to make a loan agreement, see a lawyer first. Consider how you might be represented in Court if it comes to that and, indeed, whether you could face doing that to a poor family.

I don't know how close your relationship is with your girlfriend but you might consider paying for the house to be completed provided that ownership is transferred to her. However, it is very unlikely that you could ever recover even part of your outlay if the two of you split up. If you marry her, any property, other than land, that you acquire subsequently is 50% yours if you split up.

If you are in a position to supervise the building work, you could pay the builder directly to ensure that the money is going on that and not something else.

Finally, there are many poor people in Thailand. If you help this part of your girlfriend's family, how many more relatives would you be willing and able to help in one way or another?

Please accept that I'm not judging this family or taking a cynical view. In fact, I have great sympathy with such people. I'm just pointing out your options. If I were in your position and my relationship with the girlfriend was good, I would try to spare the money as a gift, make it clear that it's not a precedent and leave it at that. Then you will always be welcome at the home and have no concerns about default problems.

Good luck whatever you decide.

[Kf6vci]

Mmh, would you really be willing to enforce such a contract? Do you know the people involved? I had some dealings on a small scaleand man, was it an eye-opener! My counterparty was an engineer with a good job and a nice home with expensive cars etc. and still, whatmay sound straightforwardnever turns out to be.

Would you risk yourrelationship to enforce this note? Would you hire a lawyer to handle the paperwork? Can't youget a lie on the property itself?

Not knowing your circumstances etc., I would fear you might lose both, yourmoney and your gf or fall out withher folks big time.

When you do it, have a pro handle it - and get some better collateral. Good luck!

[Maigo6]

I don't think you having a chanote in your hand will give you any security for the loan, it's not in your name so you cannot sell the land in any case.

A Farang loaning out money and charging interest will not look too good in a court if it ever came to that.

If you can afford it and you intend to stay with your GF, then pay for the work to be done on the house as a gift.

I wouldn't advise loaning out money charging interest to family members, what you gonna do if they cannot pay you back some months, let the interest build up, kick them out of the house, take them to court ?

You can't do that, so you will have to give the money as a gift, or accept that it may take a long time for you to get your money back, or simply say you can't afford it.

P.S. In my experience you have a much better chance being paid back a loan by a Thai person than a Farang, if it was a Farang that was after borrowing 100,000 Baht from you, I would certainly advise against it!

Edited August 13, 2007 by Maigo6

[PCA]

I would say you either give it because you can and want to help or you dont do it at all. Sure thing is that you will not get it back, with or without any papers.

[Moe]

I am quite sure that your chances of doing something with the chanote on your own are next to nil if something goes wrong especially considering you are not legally married and/or are not sure of the stability of your relationship with your partner. If you lend the money I think it would be best to understand this before going in.

I lent a large amount to the inlaws and another equally large amount to the bro inlaw. Both are interest free loans to be paid off over 4 years and an in each case a chanote agreement was ratified by the village head with my wife and I holding the land titles, and while this makes me feel somewhat secure I would not have gone ahead if I did not trust my wife (of 5 years) 100% to sort out any potential problems. This is much more important in my opinion than a flimsy agreement which as a farang you will naturally lose by default in the case of any complications. So far, 2 years in it is going well.

Also important is to find out exactly what the borrower's monthly income is and his/her ability to meet the repayments (obviously monthly repayments are preferable over yearly too). A lot of people take loans out without doing any maths beforehand on the feasability to pay them back. In this case it would be better to turn them down from the start and avoid everybody a lot of pain.

Whatever you decide to do best of luck.

[soundman]

Also important is to find out exactly what the borrower's monthly income is and his/her ability to meet the repayments (obviously monthly repayments are preferable over yearly too). A lot of people take loans out without doing any maths beforehand on the feasability to pay them back. In this case it would be better to turn them down from the start and avoid everybody a lot of pain.

As a general rule, many Thai people (with poorer backgrounds) have little understanding of financial matters, management & committments, living basically hand to mouth from one day to the next.

If you sit down and do the calculations with them to get a clearer picture of their financial position and point out, for example, that to meet the obligations of their loan they will be 70% leveraged, & with interest (dork bia) as extra, they may not be able to pay back the loan, it may help them think twice about borrowing the money.

I have one family whom I lent money to five years ago for their rice farm who have paid me more interest than the original loan amount, however they have not even eaten into any of the original capital. I'm not sure they will ever be able to repay it & I'm not looking forward to the day that after two or three failed crops I am going to have to go and excersise my claim to "chanote" on their land because the debt keeps ballooning.

Security or not - be careful about lending money to Thai people, irrespective of whether the money is leant for (your) business or personal reasons. Debt collecting is hard & time consuming without getting real dirty & selling your debts to local loan sharks, police / mafia at heavily discounted rates.

Soundman.

[Maigo6]

Sure thing is that you will not get it back, with or without any papers.

How do you know?

I have lent money to Thai people and have got my money back, so why won't he ?

If it was lending to a Farang, then that's a different matter, the chances of getting it back are very slim.

[Maigo6]

I have one family whom I lent money to five years ago for their rice farm who have paid me more interest than the original loan amount, however they have not even eaten into any of the original capital. I'm not sure they will ever be able to repay it & I'm not looking forward to the day that after two or three failed crops I am going to have to go and excersise my claim to "chanote" on their land because the debt keeps ballooning.

Soundman.

Soundmans post illustrates why lending money for profit is a dodgy business, after already recieving more than the original sum back, the poor family still owe the original ammount.

People may have a crop failure for 2 years running and will not be able to pay anything, what would you do, turn the people out of their house cos they are too poor to repay you and you want to profit from their misfortune?

Bad Karma as far as I'm concerned.

Money lending is a dangerous risky business in any country, here it can get you killed.

[SiamSquare123]

why dont you just buy 100,000 baht worth of the land and it put it in your gf's name? then let them save up 100k and buy it back from you her(you). you are more likely getting something back if she is the one controlling it, then if they are controlling it.

what is their income, how are they going to pay you back?

[rainman]

All I can say is this ...

If you do end up giving them the 100,000 and you don't get it back, whether you have a contract or not, just tell your girlfriend that you give to her as a gift whatever she gets back from her relatives. You'll have a good chance of getting the money back.

In my opinion, they probably have every intention of paying you back, but if they are able to is another question. At 2% that is 2,000 Baht per month. With up-country monthly salaries barely above that it's highly unlikely that they will be able to pay you back.

[colino]

Sorry to sound down about this , but unless you were married and new the sister realy well ,i would not lend money to them. to many guys end up ripped off and lose there g/f and the money , and even their life because land deals with g/f that go wrong

but with luck you could be ok ,

hope it works out

[duratanium]

Also important is to find out exactly what the borrower's monthly income is and his/her ability to meet the repayments (obviously monthly repayments are preferable over yearly too). A lot of people take loans out without doing any maths beforehand on the feasability to pay them back. In this case it would be better to turn them down from the start and avoid everybody a lot of pain.

As a general rule, many Thai people (with poorer backgrounds) have little understanding of financial matters, management & committments, living basically hand to mouth from one day to the next.

If you sit down and do the calculations with them to get a clearer picture of their financial position and point out, for example, that to meet the obligations of their loan they will be 70% leveraged, & with interest (dork bia) as extra, they may not be able to pay back the loan, it may help them think twice about borrowing the money.

I have one family whom I lent money to five years ago for their rice farm who have paid me more interest than the original loan amount, however they have not even eaten into any of the original capital. I'm not sure they will ever be able to repay it & I'm not looking forward to the day that after two or three failed crops I am going to have to go and excersise my claim to "chanote" on their land because the debt keeps ballooning.

Security or not - be careful about lending money to Thai people, irrespective of whether the money is leant for (your) business or personal reasons. Debt collecting is hard & time consuming without getting real dirty & selling your debts to local loan sharks, police / mafia at heavily discounted rates.

Soundman.

Understood on that & thanks. Wise word as usual from you

Soundmans post illustrates why lending money for profit is a dodgy business, after already recieving more than the original sum back, the poor family still owe the original ammount.

People may have a crop failure for 2 years running and will not be able to pay anything, what would you do, turn the people out of their house cos they are too poor to repay you and you want to profit from their misfortune?

Bad Karma as far as I'm concerned.

Money lending is a dangerous risky business in any country, here it can get you killed.

Well, I will not be taking their house from them as the Chanote offered is for a second piece of land they own and I understand lending cash can be a ddodgy business in any country, let alone LOS. I look at their ramshackle tin house and am tempted to help but am also looking at the implications of where I would stand before making a decision.

why dont you just buy 100,000 baht worth of the land and it put it in your gf's name? then let them save up 100k and buy it back from you her(you). you are more likely getting something back if she is the one controlling it, then if they are controlling it.

I don't see as that would really help if things became unstable in any way and it would give her a lot of control over her sisters land and I feel it would make matters more complicated.

what is their income, how are they going to pay you back?

As for income, that varies depending on the time of year. The sister works all year round and the sisters husband works music that is quiet at the moment but takes off in abt 2 months. They can adequately pay the 2k a month interest now and are wanting to pay more when the music 'season' starts up again (usually after the rainy season).

All I can say is this ...

If you do end up giving them the 100,000 and you don't get it back, whether you have a contract or not, just tell your girlfriend that you give to her as a gift whatever she gets back from her relatives. You'll have a good chance of getting the money back.

In my opinion, they probably have every intention of paying you back, but if they are able to is another question. At 2% that is 2,000 Baht per month. With up-country monthly salaries barely above that it's highly unlikely that they will be able to pay you back.

Yeah, I've taken that on board and pretty much answered it above - their salaries being adequate now and better later ( i know it gets better from personal experience).

......................................................................

I'll have to sleep on this one and decide what to do.

This has been their suggestion and not mine, even down to the interest payments.

I don't really want to deprive them of funds or of the chance to finish the house as life can be hard enough in LOS for many Thais as it is.

On the other hand I do not want to simply gift them the money and have other family come onto me for cash.

One possibility is that I am tempted to agree to the initial request but not to enforce it with too much vigour and see how things fare down the line. That way the rest of the family will see that I have been given the Chanote for the land and I hope some form of understanding will take place that I am not simply giving money away - even though enforcing the Chanote may not be an option no matter what happens in the future.

Alternatively I could offer them half and if any situation arises it limits the financial damage - especially as people tend to ask for more than they really need

thanks for the input too.

[Crossy]

Other posters have pretty much covered it. Just ask yourself if you can afford to lose $3300 ish if it doesn't get paid back. If you can, lend it interest free and get the positive karma

I wouldn't hesitate, although I'm married to my lady so a bit more secure. In my position 3 grand, whilst hardly small change, isn't going to put us on the breadline.

[llothar]

I can only say that 24% interest rate per month is an insane amount and much to high for a

friendship credit. In Germany it is just 1% away from an illegal business.

They will realize this and then they or your GF will let you know and feel this.

Unfortunately i would bet that they are not clever to stop the house building, save money and

continue in a few month.

[bangkoksingapore]

you are charging them 24% interest?

[palm]

The long time g/f has asked me to lend her sister and her brother in law 100,000 Baht so they can get on and finish the house they are currently slowly building, that they desperately need instead of them, 2 kids and the mother living in the corrugated tin house they currently live in.

Forget the 2% and legal nonsense; just lend them the money at 0% but via your GF. i.e make it her money being lent, not yours. I mean we're only talking about 100,000 baht? Not 1m or 10m.

You say her family (so really your family too if she's your long time gf) desperately needs it for basic housing, so just do the honourable thing!

[LaoPo]

The long time g/f has asked me to lend her sister and her brother in law 100,000 Baht so they can get on and finish the house they are currently slowly building, that they desperately need instead of them, 2 kids and the mother living in the corrugated tin house they currently live in.

I have been offered a chanote (spelling) for half a rai of land near a main road that I have long understood to be worth 200,000+ Baht.

I am asked to loan the money at 2% p.m. over a period of 2 years.

There will be a written agreement (same as used by the money lenders) between myself and the sister including the fact that if the family fail to pay for 3 months in total that they will forfeit the land to me.

I understand a Farang cannot own land but am unsure as to the legalities of where I stand if I agree to the loan and they fail to pay or make payments. Also as we never know the future for certain and relationships do break down and that could lead to failed payments so in regard to that I would like to know :-

Can I take the land temporarily and sell it within a certain period of time?

Can I sell on the debt?

Or are there any other options available with regards to the land itself.

As an aside, if I lend say 50,000 against the papers for a car would the same apply in that instance if they fail to pay the debt for 3 month per the written agreement?

Thanks

100,000 Baht is aprox. US$ 3.000.--

You have already a 'problem' because your longtime gf asked you to lend it to her sister and your brother in law...

You probably love her and don't want to risk family-in-law problems.

My advise would be: don't lend it to them but give it to them in small portions of let's say 10,000 Baht at the time and see what happens.

Shake hands and see IF they're of good-will.

IF you would do it the 'official' way and they fail to repay you....you have a problem -again- with your Lady AND your family in Law and it will end up nasty.

The problem lies with your 'long-time gf'.....and yourself.

If you do it once.....they'll come back to you, since YOU are such a nice guy!

LaoPo

[Gary A]

I think you'll find that the maximum interest rate you can legally charge is 1.5 percent per month. Loan sharks get up to 10 percent per month but simply hold the chanote. My wife loaned a woman 100,000 baht to pay off a loan shark and had her name put on the back of the chanote as holding a mortgage. To be able to have her name as a mortgage holder the maximum interest rate was the 1.5 percent per month. The loan was made to her friend to prevent the shark from taking the land. It's not legal for the shark to be able to take the land but whether it's fear or loss of face, the people normally transfer the land if they can't pay the money back as promised. It's a dirty business.

[blizzard]

lose the girlfriend guy, she more interested in her family than you.

[backflip]

Whenever you lend money, you have to ask yourself: "if they don't have the money now, how are they going to get money to pay me back. Too, as another poster noted, are you willing to take the family to the mat over 100,000THB? Probably not and, you'll be left with an empty wallet, and hurt feelings all around. As Nacy said years ago, "just say no".

[duratanium]

I can only say that 24% interest rate per month is an insane amount and much to high for a

friendship credit. In Germany it is just 1% away from an illegal business.

They will realize this and then they or your GF will let you know and feel this.

Unfortunately i would bet that they are not clever to stop the house building, save money and

continue in a few month.

<deleted> are you on???

1) We are not in Germany now - unless you tried to annexe this country

2) THEY asked me to lend the money on those terms and those term are a ###### sight less than the banks have offered - so go do some research.

3) How clever they are has nothing to do with it. And they have stopped building until getting the money together to continue with the next stage. Point is they need the new house finishing.

[duratanium]

Most of what has been said in recent posts was covered earlier and like I said, I will sleep on it before deciding what to do after reading post on the subject.

There is often a balance to be found and I am also looking at any future possible problems - as TiT - an you never really know what is round the corner.

Also I do not really want the rest of the family coming on for similar amounts, that is why I am now considering holding the chanote so they see it more as a business loan than me simply handing out money... but that was all said in an earlier reply.

[Heng]

Holding a chanote (physically) means nothing if you don't have a sell by proxy ("sunya khai fark" registered with the local land department.... tell them you'll need one of those and watch them shut the <deleted> up) contract to go along with the general loan contract. The OP is going to need another party that can legally hold land in Thailand to be the buyer in said proxy contract.

Myself, I think that loaning funds to family or friends is right up there with the "classic blunders"... never get involved in a land war in Asia, never go in against a Sicilian when death is on the line, etc.

[Jersey_UK]

I think the question you asked originally was whether you can, not whether you should...........but like everyone else I don't know the answer to the former, so I will answer the latter

My take is that they simply can't afford to borrow that sum of money or that they can and you are the cheaper / softer option - and either way I don't see it being a great thing for all concerned if you are holding a large debt over the family.

If you can afford the cash and have long term interest in the G/f I would come up with some sort of deal (with no expectation of repayment) maybe some documentation for the G/f in her name ?- and maybe only for a percentage - 50% or less (B100k seems a very round number!). just to get them in the building.

Otherwise their really is no need, I doubt it would make a great investment.

But still, I am also curious as to whether a Farang can hold a loan secured on property and can then enforce sale for repayment - maybe the property owning folks can advise? - if yer cannot own a property outright then IMO the next best thing would be owning a large debt attached to the property.

[DurianChips]

I can only say that 24% interest rate per month is an insane amount and much to high for a

friendship credit. In Germany it is just 1% away from an illegal business.

They will realize this and then they or your GF will let you know and feel this.

Unfortunately i would bet that they are not clever to stop the house building, save money and

continue in a few month.

<deleted> are you on???

1) We are not in Germany now - unless you tried to annexe this country

2) THEY asked me to lend the money on those terms and those term are a ###### sight less than the banks have offered - so go do some research.

3) How clever they are has nothing to do with it. And they have stopped building until getting the money together to continue with the next stage. Point is they need the new house finishing.

Wow, if that's true, then it's really shocking to me that the banks are charging such high interest rates. (It would be illegal here in the US, I'm pretty sure). I don't think in good conscience I could charge that kind of interest, even if the person I was lending it to thought it was a good deal. Keep in mind if it's being compounded monthly, then it's actually higher than 24 %.

Edited August 14, 2007 by DurianChips

[torrenova]

Sorry but they have not been able to raise 100k despite being able to pay back more than 2k per month on average and they own land worth 200k ? It does not add up. They could get a mortgage if they have such an income and before people say they don't have a regular income or accounts etc. it is already known that they have 2 plots of land, one valued at 200k+ and the other as yet (to us) unvalued. Perhaps another 200k.

If in such desperate need, sell the 200k piece of land !

Don;t give in, tell them you cannot afford it but suggest that they sell their land. If unwilling then they do not need the money whatever the family including your girlfriend say.

[Morden]

Sorry but they have not been able to raise 100k despite being able to pay back more than 2k per month on average and they own land worth 200k ? It does not add up. They could get a mortgage if they have such an income and before people say they don't have a regular income or accounts etc. it is already known that they have 2 plots of land, one valued at 200k+ and the other as yet (to us) unvalued. Perhaps another 200k.

If in such desperate need, sell the 200k piece of land !

Don;t give in, tell them you cannot afford it but suggest that they sell their land. If unwilling then they do not need the money whatever the family including your girlfriend say.

Perhaps a little more understanding would be appropriate:

1. Rural Thais are often not good at financial planning - usually because what they have is already spoken for.

2. This family is desperate.

3. For a Thai family, giving up land is a step towards complete and permanent poverty.

4. Land ownership does not mean cash rich.

In fact, it adds up perfectly to anyone who has a knowledge of village life.

I gave my advice to the OP earlier but my strong inclination is to make a gift and let help the family off the financial hook. As I said earlier, pay a builder if you aren't sure that they will use the money wisely. A good deed such as this, little though the amount is to a Westerner, could turn their lives around. What else would you do? Refuse and let them sink deeper as you scoff on your burger and drink your beer? Make a loan agreement that will lead to grief later? Instead of being hard on these people, spread a little sunshine!

[torrenova]

Sorry but they have not been able to raise 100k despite being able to pay back more than 2k per month on average and they own land worth 200k ? It does not add up. They could get a mortgage if they have such an income and before people say they don't have a regular income or accounts etc. it is already known that they have 2 plots of land, one valued at 200k+ and the other as yet (to us) unvalued. Perhaps another 200k.

If in such desperate need, sell the 200k piece of land !

Don;t give in, tell them you cannot afford it but suggest that they sell their land. If unwilling then they do not need the money whatever the family including your girlfriend say.

Perhaps a little more understanding would be appropriate:

1. Rural Thais are often not good at financial planning - usually because what they have is already spoken for.

2. This family is desperate.

3. For a Thai family, giving up land is a step towards complete and permanent poverty.

4. Land ownership does not mean cash rich.

In fact, it adds up perfectly to anyone who has a knowledge of village life.

I gave my advice to the OP earlier but my strong inclination is to make a gift and let help the family off the financial hook. As I said earlier, pay a builder if you aren't sure that they will use the money wisely. A good deed such as this, little though the amount is to a Westerner, could turn their lives around. What else would you do? Refuse and let them sink deeper as you scoff on your burger and drink your beer? Make a loan agreement that will lead to grief later? Instead of being hard on these people, spread a little sunshine!

You might want to wind your neck in a little before you go pontificating about me scoffing my burger and drinking my beer. Don't think for one second that I just came in out of the rain.

We know your solution. Open the wallet and give them the cash, though drip feed them. Ok, not what the OP asked and open to those with deep pockets. "Spread a little sunshine" ? easy for you to say. Perhaps your bank balance is so large that 100k is meaningless and thus you can afford to be so flippant.

It is fairly obvious that whatever the need, this family or at least this branch of this family have no ability to pay it back and their delusions of higher income after the rainy season are just that, delusions, or that "extra" money is already earmarked for another purpose. Normally partying in rural Thailand actually. I agree with your comments about them being severely poor at financial planning.

I'll go some way to agreeing with your comments about the land sale but there is no point dying of hunger but being stupidly proud of land ownership. If sold for 200k then perhaps they could turn that extra 100k into 100,000,000 who knows ? I mean, there are ways out of this but they choose to do nothing and are looking for a handout.

Next time you want to chuck 100k away, give me a call and I'll help you get rid of it. I'll even give you receipts.

[blizzard]

hey if you in bkk and 100k means that much to you you shouldnt be in bkk. bkk is best enjoyed by farangs with money not without.

on topic, nothing ever good cums out of lending poor people money. give it to them or say no can do. suggest yr gf get a better job so they can all contribute to the house. this will build her sel f worth and she can roar I AM THAI WOMAN!

opps i forgiot, nevermind they see their job as getting your money.....lol.

Edited August 15, 2007 by blizzard