Can you get out or a contract with a bank?

[JAS21]

Another one born every minute.............................

So I'm in a resort and get talkig to a guy from one of the EU countries. Apparently he met this 'sort of bar girl' on a previous visit. She does have a job in her families business.

He apparently has just 'bought on the never never' her a pick up which was a few few years old and she signed a six year payback period with Krungsri auto. He now realises that the pickup which was priced at something around 360,000Baht is now going to cost something like 530,000baht with interest.

Now he realises what has happened he wants to go to the bank and offer to pay cash, next time he comes here. My wife wont be back until late this evening 'death in family' thats why I'm staying here out of the way.She can then read the contract and explain to him what it says and give a suggestion as to what to do. A suggestion as not to come back ..... is not the advice he wants!!!!

Does anyone have any experience in getting out of a bank loan contract .... will the bank likely settle for less than the full payment with interest?

To be clear the girl signed the loan contract with the back and not him.

Please guys no comments as to what a pratt he has been, just any advice on is there any space for negotiation with the bank

[Gsxrnz]

Depends entirely on what's in the Loan Agreement. Most agreements would generally allow for earlier repayments, however there's every chance that the interest calculation is based on the Rule of 78 (hire purchase type lending). That means that in addition to a probable penalty fee for early repayment, he'll be totally screwed on the interest thus far.

Logic would probably dictate that he is better to continue with the loan based on cost of funds calculation. Early cancellations of a Rule 78 loan are HIGHLY detrimental to the borrower.

By the way, tell him to go into this sort of thing with his eyes wide open - and that's irrespective of the country he's borrowing in.

[Mario2008]

Per above. The contract might allow early repayment, but he will have to pay an amount for intrest lost. He will have to calculate what is cheaper continue to pay or pay now in full with a penalty.

[mooris7]

As long as it is not a lease all loan contracts are fixed and open so you can pay it off at anytime. You will only be charged the interest for the time you make payments.

Edited September 10, 2013 by mooris7

[wolf5370]

As the loan is in her name, but he is paying, I think it would be safer (and as above probably not much in it penalty wise for early payment in the first year) carrying on with them. If he pays it all off, she has the asset and the money is gone - if he continues to pay, if she does do a dirty on him, he can simply stop paying - its her credit not his.

[wolf5370]

As long as it is not a lease all loan contracts are fixed and open so you can pay it off at anytime. You will only be charged the interest for the time you make payments.

This is not necessarily true - it depends on the structure of the loan and the contract itself - and there will likely be penalties on top of the interest paid to date (in a balloon payment scenario - this may be significant!)

[Gsxrnz]

As long as it is not a lease all loan contracts are fixed and open so you can pay it off at anytime. You will only be charged the interest for the time you make payments.

This is not necessarily true - it depends on the structure of the loan and the contract itself - and there will likely be penalties on top of the interest paid to date (in a balloon payment scenario - this may be significant!)

Wolf, you are spot on. I'd say it's highly likely it's a Rule 78 loan. The OP should google it to understand the financial calculation in determining the cost thus far. Chances are that he's probably paid only a few Baht in the reduction of principle to date, meaning the financial cost of interest is horrific in real terms.

Generally speaking one should never repay a 78 loan early for this very reason. However, some people choose to ignore the true financial cost of money, and revert to cashflow or other considerations for repaying early.

Edited September 10, 2013 by Gsxrnz

[mooris7]

As long as it is not a lease all loan contracts are fixed and open so you can pay it off at anytime. You will only be charged the interest for the time you make payments.

This is not necessarily true - it depends on the structure of the loan and the contract itself - and there will likely be penalties on top of the interest paid to date (in a balloon payment scenario - this may be significant!)

I was giving info as per the op stating it is a loan. Balloon payments and leases are completely different!

[mooris7]

I suggest if the op wants sounds advice please give more details. Purchase price, tax, and any extras. Check to see if there is a balloon or buy back after the term. Is there a km allowance per year and so on.

[Suradit69]

As long as it is not a lease all loan contracts are fixed and open so you can pay it off at anytime. You will only be charged the interest for the time you make payments.

This is not necessarily true - it depends on the structure of the loan and the contract itself - and there will likely be penalties on top of the interest paid to date (in a balloon payment scenario - this may be significant!)

I was giving info as per the op stating it is a loan. Balloon payments and leases are completely different!

Regardless of what form it takes, a bank loan usually has some provision to compensate the bank in the case of prepayment. The bank doesn't just want the original loan amount back, but at least some of the income they had anticipated receiving when they made the loan since they'll need to look for a new investment or loan agreement to put that money to work, which may or may not be to their advantage.

"To compensate for the prepayment risk (which is a reinvestment risk), a prepayment penalty clause is often included into the loan contract."

Edited September 10, 2013 by Suradit69

[khunPer]

Most times it may cost you as much or nearly as much as the contract states, to pay out before due time. Depend on the agreement in the contract.

[pgrahmm]

I was told by a Thai purchaser of a new vehicle that his 5 year payment was the same amount (full) whether he paid it of early or right on time......

I think once you've committed to it it's a full ride to the "ending" price.....

I'm not sure what happens if you decide to sell the vehicle.....

Hope he knows it's being driven by her many "brothers"

[ericjt]

You have to read the contract. If it allows prepayment or early payment, then you can do it. If it doesn't, then you're probably out of luck. You can always go talk to somebody and try to work something out, but it all starts with reading the contract. No point speculating until you've done that.

[Mario2008]

In short, tell him to go to the bank and to ask how much he has to pay to pay it off at once. Than he can calculate the difference.

[ikbenhet]

Also please factor in the devaluing baht.

If the person paying has his money in another currency it might be cheaper to let the contact run its term.

[BuriramRes]

As long as it is not a lease all loan contracts are fixed and open so you can pay it off at anytime. You will only be charged the interest for the time you make payments.

I paid for my Fortuner on a lease from Toyota Leasing. It was a 5-year lease & after 3 years I decided to pay it off.

They only charged me the remainig capital, no additional interest payments.

I know because I kept tab on it with a spread sheet. It was pretty good interest rate too - about 6%

[zaZa9]

Not being nasty , but the truck and its payments may be the basis of her relationship with him.

Pay off the truck now , and she could well be driving it away , never to be seen again.

[F4UCorsair]

She signed the contract. Write off his deposit. There are plenty of girls.

[JAS21]

In short, tell him to go to the bank and to ask how much he has to pay to pay it off at once. Than he can calculate the difference.

Yes, it was late last night when my wife got back but this morning she read the contract. She says it's a standard contract but there is an early payment option ... which appears to be you pay 50% of the outstanding interest as a penalty.

The stated rate is 6.25% but equates to 11.124% in real terms so it says,

So car cost was 365000 interest at that rate is 40602/year then times six years is 243.612Baht 50% off is 121800baht then I think you need to add 7% and that comes to 130682. Cost would be about 495682Baht 365000+130682 that is expensive pussy.

The total price in the bank paper is 537,006 Baht... Maybe I misunderstand the calcs but

Go to the bank is the way to go as Mario says....I just wanted to tell assist him a little ....his English is just OK and her English is pretty poor. O Dear thanks guys.

[sirchai]

Please tell him that there're plenty of other girls who only want a buffalo.-

[F4UCorsair]

Please tell him that there're plenty of other girls who only want a buffalo.-

Capital cost of a buffalo is lower, and I suspect the maintenance cost on a buffalo is also lower than a pickup??