Thai Interest Rated

[Moonfruit]

A simple but technical question!

What is the interest rate quoted here on a car purchase, and how does it relate to the iterest rates that we are quoted back home?

The numbers look small, but its certainly more expensive than an APR rate which would be quoted back in the UK.

Id really be interested to know!

[Crossy]

It's a simple interest calculation, the sort we used to have back home in the days before APR was made a legal requirement (so we can compare like with like when looking at rates). Makes the rate look attractive until you see the payments

[steelepulse]

It's a simple interest calculation, the sort we used to have back home in the days before APR was made a legal requirement (so we can compare like with like when looking at rates). Makes the rate look attractive until you see the payments

Yeah you pay interest on the full amount borrowed, not on the amount still owed, so much more than APR. Simple calculations for......................

[Gary A]

Let's say you finance one million baht for five years. The interest rate is a LOW 3 and a half percent. That would be 1,000,000 times .035 or 35,000 baht a year. Five times 35,000 or 175,000 baht for the 60 months. Now you divide 1,175,000 by 60. Your monthly payment will be 19,592.58 baht per month. That reasonable 3 1/2 percent isn't that cheap, is it? Add on interest allows them to charge the full amount for the last year the same as the first year.

[cleggit]

Let's say you finance one million baht for five years. The interest rate is a LOW 3 and a half percent. That would be 1,000,000 times .035 or 35,000 baht a year. Five times 35,000 or 175,000 baht for the 60 months. Now you divide 1,175,000 by 60. Your monthly payment will be 19,592.58 baht per month. That reasonable 3 1/2 percent isn't that cheap, is it? Add on interest allows them to charge the full amount for the last year the same as the first year.

Based on the above though you'd still be better off taking out the finance and leaving the money invested at (hopefully) a lot more than 3.5% pa. Or am I missing something here ?

[Gary A]

It depends on what kind of return you are getting. In my case, I had money invested in safe ETF's that were paying a good dividend. I am still getting about the same dividends but my principle has lost over 30 percent. I would hope that most people are smarter than me and invested more wisely.

As far as the interest you are paying with the add on system, I think you will find that you are paying about 15 percent the last year. If you could pay it off in a year or two, it would be a pretty good deal. I did ask the dealer to see if I could finance for one or two years, NO WAY.

[torrenova]

Very very simply, double the interest rate if it is over 4 years. Thus, 3.5% is actually about 6.8% so say 7%. You can do it easily enough with a spreadsheet and there are loads on the net.

My interest was about that which I quoted above but the Thais don't understand it and the banks don't understand it. They cannot do the maths, merely simple stuff on a calculator. One or two of the car manufacturer's have a calculator on their websites as well.

I think for me it worked out like an extra Bt40k or so over 4 years but I'd have signed up for 6/7% anyway so I cannot complain. Just needed the vehicle.

[Rdrokit]

Let's say you finance one million baht for five years. The interest rate is a LOW 3 and a half percent. That would be 1,000,000 times .035 or 35,000 baht a year. Five times 35,000 or 175,000 baht for the 60 months. Now you divide 1,175,000 by 60. Your monthly payment will be 19,592.58 baht per month. That reasonable 3 1/2 percent isn't that cheap, is it? Add on interest allows them to charge the full amount for the last year the same as the first year.

Another way to look at it is you are paying 175,000 baht of interest on a 1,000,000 loan. 175,000 is 17.5% of 1,000,000. Nice profit for the bank.

[Meerkat]

Let's say you finance one million baht for five years. The interest rate is a LOW 3 and a half percent. That would be 1,000,000 times .035 or 35,000 baht a year. Five times 35,000 or 175,000 baht for the 60 months. Now you divide 1,175,000 by 60. Your monthly payment will be 19,592.58 baht per month. That reasonable 3 1/2 percent isn't that cheap, is it? Add on interest allows them to charge the full amount for the last year the same as the first year.

Another way to look at it is you are paying 175,000 baht of interest on a 1,000,000 loan. 175,000 is 17.5% of 1,000,000. Nice profit for the bank.

True, but that's only 6.56% p.a. which isn't all that bad when you consider that the Bangkok Bank's MRR (retail personal loan rate) is over 7%.

[carlbraun]

Very very simply, double the interest rate if it is over 4 years. Thus, 3.5% is actually about 6.8% so say 7%. You can do it easily enough with a spreadsheet and there are loads on the net.

My interest was about that which I quoted above but the Thais don't understand it and the banks don't understand it. They cannot do the maths, merely simple stuff on a calculator. One or two of the car manufacturer's have a calculator on their websites as well.

I think for me it worked out like an extra Bt40k or so over 4 years but I'd have signed up for 6/7% anyway so I cannot complain. Just needed the vehicle.

The cars dealers have all the same old way of calculating interest but the loans I made here from the banks have the same interest calculation than in europe (but with higher fixed fees)

[khunandy]

It depends on what kind of return you are getting. In my case, I had money invested in safe ETF's that were paying a good dividend. I am still getting about the same dividends but my principle has lost over 30 percent. I would hope that most people are smarter than me and invested more wisely.

As far as the interest you are paying with the add on system, I think you will find that you are paying about 15 percent the last year. If you could pay it off in a year or two, it would be a pretty good deal. I did ask the dealer to see if I could finance for one or two years, NO WAY.

Hi Gary,

Hope all is ok up your way.

My pick up is on a 5 year loan, I was under the impression (uneducated) that there would be no advantage in paying it off early but maybe there would.

For some reason I thought they had a set amount of interest they wanted from the principle amount loaned and that would not change in relation to the length of time to pay it off.

In other words..they lend x amount and they want x amount of interest, plus the principle, up to me whether I pay off in 12 months or 60 months.

Why I dont look at these things more closely in Thailand is beyond me

Is there an advantage to paying a 5 year loan off in , say two years in Thailand? Hmmmm maybe the wife was right.

See you

Andy

[torrenova]

The longer the loan the higher the rate but not by much.

Say you borrow 500k for 5 years at 10% (just for easy numbers) then they would want 5*500,000*0.1 = 250,000. Now normally if you wanted to get out after say 2 years, you'd have paid back 240,000 in principal and 100,000 in interest so you would owe 260,000. I don't know whether they would let you get out for say the 260k plus perhaps an early settlement charge of X baht or whether they would try and get you to pay the remaining 150k interest as well. Anyone done this ?

[khunandy]

Is there an advantage to paying a 5 year loan off in , say two years in Thailand? Hmmmm maybe the wife was right.

See you

Andy

Anyone??

[bob4you]

The usual way for add on interest is that it is owed when contract starts, so a built in prepayment penalty. The did this to me when I paid off my wife's motorbike that she bought without a job, with B5000 I gave her for birthday present. When I asked how could she get financing with not job or bank account answer "my friend signed for me". TIT