Financial Advisor For Personal Debt

[gatsby32]

Does anyone know a good, trustworthy financial advisor in/around Chiang Mai? (If not, one in another area of Thailand could be okay.)

A little info: A Thai friend of mine has a failed business in her past and is currently paying the price by being burdened with an enormous amount of debt. She's paying a ridiculously high interest rate and spending about half her monthly salary which makes it seem impossible it could ever be paid back under her current terms . She a little naive about her financial options and I know virtually nothing about the Thai system.

I'd like to help her by getting her some real financial advice on restructuring her debt. By the way, she is trustworthy and I don't give her money so please don't respond with the usual cynical responses about thai people, money, and farangs. It's not the situation here.

I really appreciate any good recommendations based on experience --

Thank you!

[EarthAlien]

It all depends to whom the past debt is owed.

If it is a private loan from loan sharks or unscrupulous lenders she needs to be very careful as those guys play by their own rules.

If the debt is to credit card companies/banks she can either seek to consolidate them all under one loan or one card. Alternatively she could stop all credit card payments and negotiate with them to reduce the balance to 50% of total debt and to wipe all excess charges. Once an account goes delinquent and into recovery mode the recoveries dept have a policy of seeking to obtain at least 50% of the debt which is considered a gain in terms of the total loss write offs that such departments are prepared for and factor in every financial year. You can only do that however once you have enough cash on hand to pay them out as they will not accept a payment plan.

This only works if you are thick skinned and can stand telling them repeatedly that you have hit hard times and cant pay payments. You need to do that until they place your account into the delinquent dept and once done you can negotiate the 50% payout but only after it has been sat in delinquent for about a year. The longer it is delinquent the more pain you cause them and the more willing they become to compromise.

This works but in the meantime you will have a black mark placed on your credit file thus preventing further finance (which is the last thing you need anyway,- more debt) but once all is paid out you will make the final payout conditional to them agreeing to removing the default status from your credit file.

I tell you this from experience as we had several hundred thousand baht on about 4 credit cards and hit hard times and couldn't pay. Now they are all paid out and our credit file (my wife's) is clean and we are starting a fresh with zero debt. The entire process took us about 3 years to resolve.

Note that the credit card companies will threaten you with court action which you should invite them to bring on as they know that even if the court award them everything plus costs and 15% interest PA they can never recover if you have nothing to recover and if the credit card accounts were unsecured loans as they virtually all are.

Hope that helps in some way. I wish you all the best with it.

E.A.

[Rancid]

Interesting, not so easy to skip out on debts in Thailand. The rich are a different matter of course, they have their ways...

[yoshiwara]

She can go the bank for advice but they will want any loan to cover existing debts to itself be secured against assets. So the question is does she have any eg property.

[gatsby32]

Thank you guys for the information.

Sorry, I realize I didn't give enough info in the original post! It's all debt to reputable banks - I believe it's bank loan, not credit card debt. And, it's to three different creditors. She has pretty much no assets and very little savings so she has very little with which to negotiate.

I was hoping there was a financial consultant industry in thailand for the private person, but perhaps there isn't and she needs to do her homework herself.

Thanks again for all of the advice! I'll pass it along.

Edited December 30, 2012 by gatsby32

[fletchsmile]

If it's to banks rather than the unofficial system that's a good sign.

Owed to 3 different banks will complicate things if it is one loan with 3 interested parties and make it difficult to get any agreement. If 3 loans to 3 parties that's better as there is scope to negotiate with each separately.

Firstly don't forget the two basics which sound obvious, but many people just don't do:

1) Earn more money somehow - overtime / extra job / new job

2) Cut her expenses. This is an obvious step but many people just don't do it. Writing down in black and white what you actually spend each month can be a real eye opener. Most people have things that they hadn't thought about or don't really need. Many people also prefer sticking their head in the sand and not facing it. Write down what are really essentials. Have it challenged by someone, eg you, as to does she really need all those items. Especially spend less on entertainment, beauty care, eating out etc.

Maybe she could use these two and pay off more than she is currently doing. If the interest rates are high, if she could make extra payments that would bring down capital owed quicker. Might sound counter-intuitive but if she can really tighten her belt and pay off more that makes significant inroads into capital can make a big difference. If she's paying 20% interest for example, every THB 1,000 pad off extra will save THB 200 a year or THB 16-ish a month. Interest is usually calculated on daily balances so quickly compounds. She won't be getting anything like 20% on her savings.

After that she may find she is already in a much better position

If not, the best step after that would be to go to each of the banks and explain she is struggling and can't afford to pay. Tell them if it continues she may have to default and give up on the loan. Ask them how they can help - if faced with someone possibly defaulting banks will often prefer to alter the terms than have an outright default.

The 2 main ways they might help or improve are to:

A) reschedule the debt - i.e pay it over a longer term but smaller amounts that are more manageable. The downside is it obviously takes longer, the upside is it may have less impact on her standard of living

B ) restructure the debt. If it was credit card, paying say 20%-ish, I'd ask to convert to a loan, which would be a lower rate. If an unsecured loan, the rate may well be in the late teens as a %. If she is prepared to put up some form of security to convert it into a secured loan that may also attract a lower rate. By secured = against some form of asset. Taking out a refinance mortgage on her home would likely be among the lowest rates. That of course has the downside of putting her home at risk, although would reduce interest and payments, if she can manage repayments OK and be disciplined. It may also be possible to simply stop paying or say she will stop paying and ask them to write off some of the loan. Be very careful of that option tho' as defaulting on one loan will severely restrict chances to get any new credit.

Also resist any temptation to use credit cards without paying them off in full each month. Definitely do not go to loan sharks as she sounds like she isn't that good on calculations and will end up in serious serious trouble.

BTW EarthAlien's post on playing hardball is a reasonable way of handling things, and as he says you'd need to be tough and thick skinned and have little choice. The suggestions I've made above are things that you could do prior to that stage, so hopefully you might not need to get to that. So it also depends on just how bad it is. Try and sort out without defaulting on the loans thru my suggestions. If that doesn't work out, as he says she may have to rough it out.

Edited December 30, 2012 by fletchsmile

[gatsby32]

Thank you so much, Fletchsmile! That's all great, I'm going to talk it over with her soon.

Unfortunately, she has no room to manuever without negotiating with the bank. Her salary is around 10k / month (baht!) and she's currently paying 5k / month to these loans.

[yoshiwara]

The question now is what loans at lower interest rates the bank currently offers and whether she meets the criteria for issuance of such loans.

Time to speak with them.