Thailand’s household debt has ballooned to almost 16 trillion baht, with more and more Thais at risk of defaulting on their loan repayments. The pressure then falls on guarantors, who are often family members or friends of the debtors. And that pressure is taking a deadly toll.
Earlier this month a police captain killed himself after a bank pressed him to take responsibility for repayment of his friend’s 800,000-baht loan.
This was not the first time that a pressured loan guarantor has committed suicide.
Late last year, another woman lost her husband in similar circumstances. The 69-year-old retired official of the Royal Irrigation Department fatally shot himself after being told he had to pay his friend’s debt as the guarantor.
“He was under so much stress and had been complaining about his friend and his status as guarantor,” his wife lamented.
In other cases, the stress fell on the guarantor’s family members. In December 2021, a 32-year-old woman tied her hands and those of her nine-year-old daughter together and was getting ready to jump off a Bangkok bridge.
The mother was distressed because her partner had fallen into serious financial trouble after his friend defaulted on a house loan. As a guarantor, the woman’s husband was forced to pay the loan.
Fortunately, a passing motorcyclist noticed the mother and daughter, and several good Samaritans gathered to persuade them to abandon their suicide plan.
A guarantor’s duty
Dharmniti, a professional business organization specializing in legal/auditing services and training, advises people to exercise extreme caution before signing contracts as guarantors.
“Under the law, a guarantor is a person who agrees to repay if the debtor defaults,” Dharmniti explains on its website.
In most cases, guarantors are debtors’ siblings or close friends. However, these close ties often start to fray when the debtor begins defaulting and the guarantor is left with responsibility for making repayments. This is when guarantors realize that there can be a big price to pay for being generous and trusting.
In the case of a debtor who takes out an 800,000-baht loan with no collateral and then fails to make repayments, the guarantor will have to repay the 800,000-baht principal debt plus interest based on the rate set in the contract.
Guarantors’ rights
Guarantors have the right to refuse to pay the accumulated interest if the creditor fails to inform them of the payment default within 60 days, making it impossible for them to repay sooner. In such cases, guarantors have to pay the interest from the date of the default to the date of the repayment.
If debtors have paid some instalments, guarantors are only responsible for shouldering the rest of the loan. They are advised to check how many payments have been made so the creditor does not dupe them into paying the full amount plus interest.
Guarantors also have the right to refuse payment if there is enough evidence to prove that the debtor can repay and that it is not difficult for the creditor to collect the payment.
Death does not get you off the hook
Under the law, guarantors’ obligations do not disappear after death. Upon their passing, their assets can still be seized for repayment of outstanding debts before their heirs receive their legacy. Put simply, if guarantors for bad debts expect to leave some valuables for their family members after they pass away, their hopes may be in vain.
In these cases, the financial institution that extended the loan has priority when it comes to the distribution of the deceased guarantor’s assets.
Meanwhile, if the guarantor is married, then their spouse could be required to help with the repayments if the loan contract shows that they signed as a guarantor with the consent of their spouse.
Once a loan contract is signed by a guarantor, it cannot be revoked unless stipulated otherwise in the financial institution’s loan conditions or with the consent of both debtor and creditor.
By Thai PBS World’s General Desk
