life insurance when taking out a bank loan. Mandatory?

[Awk]

Hi, we are, hopefully in the not to distant future, applying for a bank loan in order to buy some land to build a house on. Or rather, Mrs. Awk is, with me, working off-shore, serving as guarantee. From what I've read here and there, the banks will all try to push a rather expensive life insurance on us (or rather, Mrs. Awk) at very end of the process. Is this insurance mandatory, or just something they are selling hard?

Presumably the bank will not be lending us the whole amount needed to buy the land, but e.g. 80%, with us paying the remaining 20% from our own money. If we default on the loan, presumably they can sell the repossessed land and get back at least what they lent us, if not more. so I don't understand why the bank should require us to buy an expensive life insurance also. Before coming to Thailand, I had never heard about this concept, and it is not something used in my own country.

We had a similar problem when buying a new car a year ago, where the brand dealer was advertising a loan of about 80% of the sales price with zero interest. The finance institution (or some small bank I had never heard of? not sure) the car brand had contracted with sent some woman to the car dealer to talk with us, and this woman, at the end of taking down both Mrs. Awk's and mine details, said we would also need to purchase a life insurance for Mrs. Awk from here. Never having heard about anything like this at that time, I could not help but laugh slightly at her idea, and told her thanks, but no thanks, no, no way.

There were some tense moments, and the bank woman said it would be very difficult for us to get a loan without the insurance. I honestly thought the idea was ridiculous so just departed to another corner to examine the colour finish of one of the show room models, allowing Mrs. Awk to continue the conversation by herself. Mrs. Awk did not appreciate it very much, but in the end we then signed the loan application.

Never heard anything more about any life insurance, but a few days later the car company called to tell us the loan application had been approved.

So my obvious question is, is the life insurance the banks are pushing the same nonsense, or will they really deny us a loan if we do not purchase the insurance?

If purchasing life insurance is unavoidable, how does one get away with paying the least amount? I've read some posts indicating that Bangkok Bank will require the whole insurance, for the entire duration of the loan, to be paid up front. I think I've read some other posts indicating SCB will allow you to pay one year at a time, and if you only pay for the first year and ignore the bill for the subsequent years, apparently nothing bad happens.

When applying for the loan I want to apply for a long-term loan (20 years, or close to that), but if things go as hoped, I I want to pay of the loan much quicker. If a life insurance is forced upon us, I obviously do not want to end up paying for 20 years of life insurance if the loan will end up being paid of in 3. At the same time, I don't have much hope of the bank refunding any up-front paid life insurance payment for the remaining 17 years.

I've also read that some banks, and I am interested in which, will charge a lower interest for the first few years, and then raise it. This, coupled with "no fee" for paying of the loan early, which I will obviously have to verify is the case, would obviously be beneficial to somebody who hopes to pay of the loan quickly.

For the record, the loan will probably only be for buying land, while money for building the house I will get from another source. Kasikorn turned Mrs. Awk down as they did not want to lend us money to buy just land. They indicated things may change if she could also submit some (approved?) plan for the house to be built. Bangkok were about to accept the application, when the seller suddenly changed his mind (him having already received our deposit not withstanding).

Since then I've been told by others that Bangkok Bank is probably the worst bank to deal with and are unlikely to let us borrow much (perhaps only 50% of the price), and SCB would be much better. I personally have no idea, but thinking that next time I will perhaps try SCB instead? Or both? Would need to pay the land appraisal fee of 2,500 (at least, that is what it is in BB) twice then though. :-/

Thanks for any tips.

[meatboy]

i would think it would be very very difficult to get any sort of loan without security.

going back 25yrs.when the wife wanted to open an acc.with lloyds bank in the uk.they would not give her a card without taking out insurance.

she bought a new car in the uk.and had it on 0% interest but only if she put down 40%.

so unless she has a good track record with a bank she will need some sort of security,or a person who will be a guarantour.

[2fishin2]

Security = the title to land, house or the creditors name on titles until the mortgage is paid in full.

Insurance = common SCAM by all lenders. Dont fall for it

[kbelyeu]

When I purchased my new truck I was told insurance was mandatory but that if I paid off the loan early the monies would be returned to me.

Kurt

[Estrada]

Citibank originally charged me for an annual life insurance fee against my credit cards, but now they insure my possible debt arising form death for free.

[IMA_FARANG]

Deposit insurance or insurance when taking out a bank loan is NOT required.

Decide for yourself if it is worthwhile.

Many banks are pushing it as "safety" for the borrower.

Usually what it really means as an extra uneeded cost and a benefit to the bank only.

[rotary]

As a side note be sure you find out if paying off early reduces the amount of total interest. There are several post about interest and paying off early on TV so it might be good to check them out and most important ask the lender about interest if you pay off early. I have worked in the oil industry for +/-40 years and have seen Boom to Bust several times. Have a look at the rig counts from 1975 to present as these are available from several web sites right on line. It is a possibility we might, I say might be going into one of the bust stages where 50% of the rigs will go down over the next 2 years or less. Have you given any thought to what happens if the rig count goes down and you have a 20 year loan on land. None of my business but it might be good to think this loan through.

One last thing, have you asked if it will be a problem to borrow money from another source if a bank holds the land deed on a loan? Again something to think about and check out.

http://www.wtrg.com/rigs_graphs/world/rigwld.gif

[Crocbait]

My wife got a loan from SCB for our house. We were told couldn't get the loan without life insurance which was 44k THb paid in full for the life of the loan (20 years) and added to the loan amount. Seems to be a common scam. We also got a bill the next year for some other annual building insurance which we knew nothing about. Wifey rang SCB and tore strips off them.

[fletchsmile]

It will depend on the policies of the bank involved, which will also take account of factors like what percentage you are borrowing, age, risks on you that the bank perceives. Some banks may not want to lend to you without it. Others may.

Cheers

Fletch

[Jonmarleesco]

A mortgage - which is what you are referring to - usually requires a life assurance to cover the mortgage repayment in the event of the borrower/guarantor's death; Thailand and elsewhere. Why would the lender want to go to the trouble of selling the collateral - possibly at a loss - in order to cover the loan? Why would the surviving borrower want that? That said, yes, the banks are undoubtedly pushing unsuitable (for you) and expensive (for what they are) policies. Unfortunately this being Thailand, the piper plays the tune.

[markeewan]

My wife just took out a 2 million baht house loan with Bangkok Bank. There was an upfront charge of 60,000 baht to cover fire insurance for 28 years and life insurance for her for ten years. The life insurance pays out the remaining mortgage upon her death.

She said the insurance was a condition to get the loan.

[inkorat]

Several of the banks are also in the insurance business and it makes them a lot of extra money.

Try the Government Savings Bank, good rate and no insurance required.

[AnotherOneAmerican]

SCB insisted on 20 years life insurance up front on a 27 year home loan.

"Do you want the loan or not" ....... when questioned.

They also stuck another 2,500 for the first years house insurance on my first payment, that hasn't appeared again ....... yet!

Insurance cost = first year interest discount, so all in all, not too bad.

[Awk]

There seem to be some conflicting opinions here.

At least some of those who are saying it is necessary to purchase insurance seem be speaking from experience, while I am not sure if those who say it is not necessary are also speaking from experience.

So may I please ask: has anybody here actually got a loan for land or house from a regular bank without also paying for the insurance?

[winone]

We took a loan from SCB to buy a house, it was 1.5 million baht loan and they slap on another 150,000 baht life insurance for both of us. The insurance company send us reminder to go for medical checkup which we just ignore. After 6 mths, they inform us the the insurance was not approved and thereafter the bank offset the 150k from our loan. Maybe we are lucky but not much choice at the time.

[winone]

We took a loan from SCB to buy a house, it was 1.5 million baht loan and they slap on another 150,000 baht life insurance for both of us. The insurance company send us reminder to go for medical checkup which we just ignore. After 6 mths, they inform us the the insurance was not approved and thereafter the bank offset the 150k from our loan. Maybe we are lucky but not much choice at the time.

[Nuddy]

In Australia the Banks seek insurance when you want a mortgage loan. If the loan sought is higher than 80% of the Banks value of the assets then you take out and pay for insurance to cover the Bank for the bit over 80% of their value.

Then some times they want a life insurance cover

Then some times they want unemployment insurance.

A law was passed that the Banks cannot dictate which insurance company you use but the Banks can still insist on these insurance policies being taken out.

For the bank it can lower the risks of lending to an applicant who is not really up to the mark.

However, it can just be a sales pitch and one should test whether this really is a condition of approval or just a selling technique by the Bank.

In the end game its up to the bank if they want to lend But its also up to the borrower if he/she wants to accept those terms.

[MiKT]

Just took out a loan 2 weeks ago with SCB which I had been reliably informed by a very knowledgeable TV adjudicator is the best bank for loans.

This certainly proved to be that case and they were very helpful.

The loan for 15 years was made only in my wifes name with me as guarantor and our condo as the security and I had to transfer my 50% of the condo ownership to her as they will only loan to a 100% owner.

SCB came and valued our condo and made a loan of 50% of their valuation (this was their max). The insurance was 66k Baht, which all had to be paid up front out of the loan. It only covers the borrower (wife) not me (the guarantor).

I asked about the insurance; and to to answer your query, yes the insurance is absolutely mandatory with all the Thai banks.

The good thing is if you pay back the loan earlier you get more back than you would with a true mortgage that include life insurance.

I am not surprised to hear that other banks turned down the loan. Our loan was to build on some land we have which is worth a lot more than the condo, but the SCB man told us that none of the banks want to loan against land and new houses as they have so many defaulters on their books and they cannot get rid of them quickly enough, so have to spend to maintain them. Also half built houses are hard to shift.

Also, unlike condo's which can be owned 100% or partly by Farangs (who would then have a much higher stake in paying back the loan) it would all be in your wife's name name; and many a Farang has lost out on those deals (look for me begging outside the bank one day).

But SCB are the best for making loans for building houses and if you send me private post I can give you the details of the SCB manager we dealt with.

Interestingly enough, he absolutely refused all attempts to give him "tea money" for his assistance, which is a first.

Good Luck

[fletchsmile]

Took out a mortgage on a condo in 2007 with Stan Chart for 82.5% of value. Could have borrowed higher %, that's just what we chose. Wife's name guaranteed by me. They did want to see building/fire insurance in place. But no life insurance required. They raised it and I said we didn't want it or need it.

Cheers

Fletch;)

[fletchsmile]

Just took out a loan 2 weeks ago with SCB which I had been reliably informed by a very knowledgeable TV adjudicator is the best bank for loans.

This certainly proved to be that case and they were very helpful.

The loan for 15 years was made only in my wifes name with me as guarantor and our condo as the security and I had to transfer my 50% of the condo ownership to her as they will only loan to a 100% owner.

SCB came and valued our condo and made a loan of 50% of their valuation (this was their max). The insurance was 66k Baht, which all had to be paid up front out of the loan. It only covers the borrower (wife) not me (the guarantor).

I asked about the insurance; and to to answer your query, yes the insurance is absolutely mandatory with all the Thai banks.

The good thing is if you pay back the loan earlier you get more back than you would with a true mortgage that include life insurance.

I am not surprised to hear that other banks turned down the loan. Our loan was to build on some land we have which is worth a lot more than the condo, but the SCB man told us that none of the banks want to loan against land and new houses as they have so many defaulters on their books and they cannot get rid of them quickly enough, so have to spend to maintain them. Also half built houses are hard to shift.

Also, unlike condo's which can be owned 100% or partly by Farangs (who would then have a much higher stake in paying back the loan) it would all be in your wife's name name; and many a Farang has lost out on those deals (look for me begging outside the bank one day).

But SCB are the best for making loans for building houses and if you send me private post I can give you the details of the SCB manager we dealt with.

Interestingly enough, he absolutely refused all attempts to give him "tea money" for his assistance, which is a first.

Good Luck

The problem with terms like "best bank" is they are subjective and relative. Best for one person is not necessarily best for another.

Given your person also told you life insurance is mandatory for all Thai banks, the % you were able to borrow and some if the other conditions you mentioned I'm not convinced at your idea of "best".

What you get told and what is reality often differ

If you checked out Bangkok bank's website for FAQ and conditions they describe mortgage insurance on home loans as "optional". Not saying BBL are best. Their website tends to have better English and better info than most should you want an idea of what's out there in banking. Again some things vary though between banks and even policies within the same bank or implementation at different branches. Often inaccuracies too on websites.

Cheers

Fletch

[MiKT]

Just took out a loan 2 weeks ago with SCB which I had been reliably informed by a very knowledgeable TV adjudicator is the best bank for loans.

This certainly proved to be that case and they were very helpful.

The loan for 15 years was made only in my wifes name with me as guarantor and our condo as the security and I had to transfer my 50% of the condo ownership to her as they will only loan to a 100% owner.

SCB came and valued our condo and made a loan of 50% of their valuation (this was their max). The insurance was 66k Baht, which all had to be paid up front out of the loan. It only covers the borrower (wife) not me (the guarantor).

I asked about the insurance; and to to answer your query, yes the insurance is absolutely mandatory with all the Thai banks.

The good thing is if you pay back the loan earlier you get more back than you would with a true mortgage that include life insurance.

I am not surprised to hear that other banks turned down the loan. Our loan was to build on some land we have which is worth a lot more than the condo, but the SCB man told us that none of the banks want to loan against land and new houses as they have so many defaulters on their books and they cannot get rid of them quickly enough, so have to spend to maintain them. Also half built houses are hard to shift.

Also, unlike condo's which can be owned 100% or partly by Farangs (who would then have a much higher stake in paying back the loan) it would all be in your wife's name name; and many a Farang has lost out on those deals (look for me begging outside the bank one day).

But SCB are the best for making loans for building houses and if you send me private post I can give you the details of the SCB manager we dealt with.

Interestingly enough, he absolutely refused all attempts to give him "tea money" for his assistance, which is a first.

Good Luck

The problem with terms like "best bank" is they are subjective and relative. Best for one person is not necessarily best for another.

Given your person also told you life insurance is mandatory for all Thai banks, the % you were able to borrow and some if the other conditions you mentioned I'm not convinced at your idea of "best".

What you get told and what is reality often differ

If you checked out Bangkok bank's website for FAQ and conditions they describe mortgage insurance on home loans as "optional". Not saying BBL are best. Their website tends to have better English and better info than most should you want an idea of what's out there in banking. Again some things vary though between banks and even policies within the same bank or implementation at different branches. Often inaccuracies too on websites.

Cheers

Fletch

Yes, it seems that you are certainly right and like everything else in the LOS, nothing is what it seems.

From all the posts above, it is clear contrary to what the SCB told me, life insurance may not be mandatory for a loan so the only thing to do is to check out all the banks and see who will give you the best offer. The only problem being (as far as I can tell) you would have to pay each of them a few K for a property valuation (but maybe this is not necessary if you are buying a new condo - again have to ask).

But I must stress, in our case, the loan was not a mortgage, but a straightforward loan with no conditions on its use and no requirement to use it to purchase a condo (or anything else) our condo was just used as surety against the loan, thus in our case, it was a clear case of "no insurance, no loan".

Also "re best bank" for loans, again this was hearsay and you are quite correct it must be totally subjective. However, the TV member who advised me seems to have lots of knowledge about this and based on my recent experience I am very pleased to say he was right.

I have been dealing with Bangkok Bank HQ in Silom for 20 years and to be honest I have never been entirely happy with their services, only too frequently just the opposite. But they have improved a bit in recent years.

Certainly years ago they were very reluctant to loan to farangs (or their wives) very rude and condescending attitudes towards people from up-country being the norm for many BKB HQ staff.

There was another thread recently about farangs transferring money from abroad to purchase condo's; and once again it turned out that nothing here is fixed in stone. In my case 12 years ago the BKB insisted I open a US$ account to transfer money from abroad to satisfy the legal regulations that farangs can only purchase a condo if they bring in the money from abroad.

But other posters have had different experiences and I urge any farang member thinking of purchasing a condo in their own name (or shared) to look at this post (there may be other similar threads) and see if it offers some help in deciding what is best for them.