A loan in form of money is considered in Thailand as a loan for consumption which is primarily governed by Thailand’s Civil and Commercial Code. Section 650 of the aforementioned Code states that a loan for consumption is a contract by which the lender transfers to the borrower the ownership of a certain quantity of property which is consumed and the borrower agreed to return the property of the same kind, quality and quantity.
When the amount of the loan exceeds 2,000 Baht, it should be in writing; otherwise, the same loan will not be enforceable against any party. The best evidence for the contract of loan is the document of loan itself which must be signed by the borrower. The parties are free to stipulate that the amount of loan will bear interest. However, the interest shall not exceed 15% of the principal amount per year. If the parties agreed for a higher rate, the same shall be reduced to 15% by the courts.
There can be no compound interest. Interest cannot bear interest. However, the parties may agree that the interest due which was not paid for not less than one year, shall be added to the amount of the principal loan and the whole amount shall bear further interest. It is a requirement however that the same shall be in writing to be enforceable. The prohibition on compound interest shall not be made applicable in cases of commercial transactions. Speak to us in Thailand with regards to debt collecting in Thailand.
The creditor is given the right to compel performance of a debtor to fulfill his obligations when they fell due. In a contract of loan of money, the creditor may bring a collection suit in court for recovery of the debt. The debtor may be declared in default if he cannot perform his obligations and the debtor can be made liable to pay damages to the creditor.
If the debt is expressed in a foreign currency, the payment of the same can be made in Thai currency provided that the exchange rate to be used shall be the rate imposed at the place of payment.
If the loan in form of money and the borrower paid it by delivering goods or property to the creditor and the latter accepts the same, the delivery of the goods or property constitutes payment. The amount of the goods for the payment of the loan shall be determined by its market value at the time of its delivery.