Bank Finance

[duratanium]

If you have a bank loan to buy a vehicle over, say, a 4 year period and want to pay the loan off early I am wondering what the situation is regarding the interest payments.

Is the bank within rights to ask for 50% of the remaining interest on the contract?

So if I owe 200,000 Baht and want to pay that today can they ask for 47,000 Baht interest with 30 months left on the contract or is that not legal in Thailand?

On originally asking about this before taking out the loan, the banks representative said the loan could be paid back early with no interest penalties incurred. Would that constitute a legal agreement also here in Thailand?

Any serious answers welcome before I go see the bank tomorrow.

Thanks.

[sonicdragon]

Yes, it would constitute a legal agreement, but if you cannot proove it, and particularly if you subsequently signed a loan contract providing for penalties on early repayment, it will not be of any use.

The starting point is to read the fine print about interest calculation and early repayment in the document that you signed.

[bendix]

I can't speak generally, but I asked this exact question of Kasikorn Leasing yesterday as I signed the finance arrangement on my car.

I'm taking a four year loan. I asked them about the implications of paying the loan off quicker.

They categorically and clearly stated that if I pay it off before HALF the period (ie two years) the interest for four years remains payable. If, however, I wanted to pay off the sum after two years, then the interest payable is readjusted.

I guess it's to ensure a minimum of interest (which, given the rate is only 3.2% is understandable) for a minimum period of time. After that minimum period lapses, they are happy to foregoe the interest if it hasnt yet accrued.

[duratanium]

Thanks for that.

I specifically asked about the interest repayments as I could have had the money sent from my own bank to pay the finance in the first place and could have paid that off in the same way without being penalised by interest rates.

It was the g/f that asked about the interest and early repayment (on my behalf) and her sister was there at the time. It was an agent of the bank that arranged the finance and I would not have signed knowing I would be penalised. But TiT.

So, we have been asked to go to the bank itself tomorrow to discuss the matter. I am reluctant to back down totally but am willing to reach some compromise on the matter and will have to see what is said.

I am unsure if Thai banks are willing to compromise or if I am likely to be butting my head against the proverbial brick wall.

[CWMcMurray]

Is the bank within rights to ask for 50% of the remaining interest on the contract?

Not haveing read your contract I can not comment on your specific case but I am in a similar case and I consulted a lawyer and was told that most standard car loan agreements are set up that way.

Before even reading my contract or me telling him what bank it was or what they had told me, he said that the most likely outcome would be that if I paid off my loan early the bank would only discount 50% of the remaining interest charges not 100%.

I haven't haven't tried to negotiate with the bank but I would be very interested to know how it turns out if you try.

That being said, if you specifically discussed this matter with the loan officer before signing the loan you contract may be different.

[gregb]

Thanks for that.

I specifically asked about the interest repayments as I could have had the money sent from my own bank to pay the finance in the first place and could have paid that off in the same way without being penalised by interest rates.

It was the g/f that asked about the interest and early repayment (on my behalf) and her sister was there at the time. It was an agent of the bank that arranged the finance and I would not have signed knowing I would be penalised. But TiT.

So, we have been asked to go to the bank itself tomorrow to discuss the matter. I am reluctant to back down totally but am willing to reach some compromise on the matter and will have to see what is said.

I am unsure if Thai banks are willing to compromise or if I am likely to be butting my head against the proverbial brick wall.

I haven't been in your situation exactly, but have been involved in several discussions related to various contracts in Thailand. As a general rule, I can tell you that only the written contract will be considered. Whatever the bank representative said or did not say is totally irrelevant, unless you want to file a criminal complaint for fraud with the police. In that case, you can also be sued for libel if you can't prove it. (I've never tried this, but I can imagine it would essentially require a recording of the conversation. It's not a path I would recommend.)

I would do the following:

Read your contract. If it says you have to pay interest for terminating early, then you don't have much of a choice.

Ask, humbly, for a discount on the grounds that you did not understand what you were signing because the bank representative explained it incorrectly. You may get sympathy, you may not.

If not, it will not be worth your effort to pursue it. You will lose. You are best off making this request at the head office, not a branch. The branch will most likely not have the authority to cut a deal.

BTW, don't feel too sorry for the poor finance company that *ONLY* charges 3.2%. That is 3.2% simple interest, and works out to over 6% APR (real interest). The way they specify interest on vehicle loans over here is one of those minor things that irritates me.

[fletchsmile]

A few years back I used to work for a company with a subsid that was a MV retailer in BKK. Not much different to elsewhere in the world. As above - read your contract, that's the starting point for your legal rights.

Then bear in mind a company almost always has discretion to waive fees, interest, penalties, etc. Same goes for selling you the car in the first place, though often the retailer has a maximum they can discount before needing the wholesaler's permission. In the same way you could also offer to pay more - but people rarely do! . The main exceptions are if you don't agree or legally they're unable to change. Latter being rare.

It will vary company to company who can waive what though. Your average clerk, probably not much if anything. Their boss more likely a small amount, their bosses boss more, committee above that etc, all the way up to the board of directors in theory.

So in practice it's how far up the waiver process you can get. eg are you a valued customer? are you likely to cause more problems than it's worth? what are the amounts involved vs goodwill? your negotiation skills? what's in it for the company? what did you believe at the time? What were you told verbally? etc. all can be factors. It's often easier if the company selling you the car also financed it for you. If you financed elsewhere same principles apply, except you could even ask the MV distributor to help you talk to the finance company. After all they will maintain a relationship, and put business their way.

So by all means, ask to waive the fee. Ask to discount it. If you don't get want you want, you can ask if you can speak to their boss. It's your call. You don't even have to by terminating early in theory (tho' less likely). The company will then make a busines decision. Your task is to see at what level you can push that decision. BTW You probably won't get to Board level for 200k a car tho' You'll be either so important they'll give it you easily, or not worth their while

Edited August 22, 2007 by fletchthai68