The law permits an individual to lend money to another person under terms freely agreed to by both parties. However, the lender must realize that a mere verbal agreement will not be sufficient to claim its due if the borrower fails to repay. Thus, a loan agreement is usually drafted by the lender or by a Thai lawyer who will affix all the clauses to protect the money lender. It is therefore recommended to formalize its approach in writing, which can take the form of a loan agreement signed by the lender and the borrower. The loan agreement between individuals must specify:
➤ The amount borrowed
➤ The duration of the loan
➤ The amount and frequency of repayments
➤ The interest rate, if applicable
➤ For a loan of a significant amount, it is preferable to be accompanied by a notary to formalize your approach
Also, it is essential to attach the identity cards and passports of the signatories for identification purposes. Also, a proof of residence such as a blue book (Tabbian Ban) could be added as an annex to the loan contract.
What is a loan contract between professionals?
The business loan agreement is a document that summarizes in detail all the conditions and characteristics of the loan. It therefore includes several essential parts: the particular conditions of the loan, the duration, the interest rate, among other information.
➤ The business loan contract must exhaustively detail all the particular conditions of the credit. For legal reasons, transparency and visibility, all these data must be transcribed
➤ These data must be transcribed
➤ Concerning the person or persons
➤ The name and address of the bank
➤ The name and address of the person, the names and addresses of the guarantors
The amount of the loan, the purpose of the loan, the interest rate, the term, the number of installments (if any), the alternation of installments (if any), the application fee (if any), the total price of the credit. It is recommended that the head of the company will have to sign and stamp the loan agreement to bind the company. It will also be useful to add the company’s certificate and the manager’s identity card or passport to the contract’s annex.
Does a loan agreement have to be in writing?
The loan agreement in Thailand is strictly regulated by Sections 640 to 656 of the Civil and Commercial Code. These provisions specify the following:
➤ The interest cannot exceed 15% per year
➤ Any loan over 2,000 baht must be in writing to be able to claim it in court. Thus, a written loan contract is mandatory to make it legally binding
➤ If a loan agreement does not specify the applicable interest rate, the default interest rate will be 7.5% per annum
➤ Stamp duty on the loan contract of 1 baht per 2,000 baht of the total loan amount up to a maximum of 10,000 baht
If the lender and the borrower agree to a loan of more than 2,000 baht, Thai law requires written proof of the loan, signed by the borrower, for the loan agreement to be enforceable in Thai courts. With respect to this evidence, the best practice is to have the borrower and lender sign a loan agreement that covers the key details of the loan, which are discussed later in this article.
How to write a loan agreement?
In Thailand, the form of the loan agreement can be chosen freely by the parties, provided that it contains all the required information. The contract in the form of a private deed is the contract drawn up and signed by the parties without the intervention of a notary. This contract has the effect of proving the exact amount of the loan. The private deed contract can be authenticated by the legalization of the signatures or by the registration of the contract. This contract can also be drafted by a Thai lawyer who will take care of the formalities of registration of the said contract to be opposed. A loan contract must essentially contain clauses on :
➤ The identity of the parties to the contract: Name, first name, and main address
➤ The amount and duration of the loan: the amount of the loan must be written in figures and letters
➤ The purpose of the loan: the reason for which the parties have agreed
➤ The date the loan will begin and the date the funds will be made available to the borrower
➤ The terms of repayment of the loan: specifying the installments and the interest rate
➤ The commitments of the lender and the borrower
➤ The termination of the contract
➤ The guarantees and possible penalties for late payment
➤ This list is not exhaustive, and it is up to each individual to complete it according to his or her needs. The contract thus established must be dated and signed by the parties
Why download our loan agreement template?
Our loan agreement is professionally drafted and includes all the necessary clauses to protect your investment. Thus, the following essential clauses have been included in our loan agreement:
Loan amount: it is essential to indicate the amount lent and the date of remittance of the funds. Payment: Indicate the terms of repayment of your loan and the dates of compensation. You may also include interest, if applicable. Penalty: Include any late payment penalties for late repayment or non-repayment by the borrower. Covenants: Protect yourself with this clause in case the borrower defaults and additional costs are incurred. Binding effect: ensure that your contract can still be enforced even in the event of the borrower’s death.
Can a foreigner obtain a loan?
There are two possibilities for foreigners who wish to obtain a loan in Thailand. This is especially necessary to buy a property in Thailand.
Getting a loan from a Thai bank
Several banks in Thailand all offer a range of bank investment loans to Thai and foreigners. However, several criteria are required and differ depending on the Thai bank:
➤ The foreigner will need to bring an employment contract of at least one year, passport, visa, and work permit
➤ A certificate from your employer indicating your seniority and your annual income, including your fixed salary and your bonus in the year
➤ Your salary slips and bank statement to prove the total resources obtained each year
➤ Banks are also entitled to request business documents from your employer to ensure the continuity of employment
➤ Other documents may be requested, such as real estate holdings, investments, life insurance, etc.
Other documents may be requested, such as real estate assets, investments, life insurance, etc. These requests for information and documents vary from one bank to another and according to the profile of the person wishing to take out a loan in Thailand.
The financed good: In general, the Thai bank grants a loan to proceed to the purchase of an apartment within the framework of the law on the joint ownership. Indeed, the property will have to be registered in the name of the foreigner.
Titles required: The bank may register a mortgage on the property to ensure that the loan will be repaid. In addition, collateral may be required if there is not enough cash to finance the property. The mortgage agreement must be in writing and registered with the relevant land office.
A loan from international banks
Two international banks, the United Oversea Bank and the Bangkok Bank Singapore, have been offering loans to foreign investors wishing to invest in Thailand for many years. Both banks offer the same condominium financing to foreigners in Thailand.
Can the terms of the contract be changed?
The modification of a loan contract can take place even after the signature if the parties agree on the improvement that will be made. Of course, it is strongly recommended that this modification be made in writing after the signature of this contractual amendment. The contract will then have to be amended at a later date.
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