Things to Know before doing a Joint Loan

Mr. A, aged 28 has a salary of 25,000 baht and wants to buy a home priced at 3,000,000 baht. After making some calculations, he found that he would need to pay approximately 17,900 baht in mortgage payments (In the case that he took out a 30-year mortgage with an interest rate of 6% per year). However, with the amount of money that he is making from his salary, most commercial banks will likely not approve his mortgage loan due to his monthly mortgage payments (17,900 baht) being more than 40% of his annual monthly income exceeding his ability to pay off his debts (Debt Service Ratio). This means the highest amount of liabilities Mr. A can incur per month is 10,000 baht (25,000 x 40%) and if he has other monthly expenses this would also diminish his ability to pay off his mortgage.  


If Mr. A desires to buy the home that he wants, the solution to his predicament is to find a “co-borrower” for a joint loan to make it easier to apply for a loan with commercial banks allowing for a larger loan to be approved. Finding a co-borrower is the solution for the primary borrower who is unable to meet all the requirements for a loan by the bank.  


If Mr. A desires to buy the home that he wants, the solution to his predicament is to find a “co-borrower” for a joint loan to make it easier to apply for a loan with commercial banks allowing for a larger loan to be approved. Finding a co-borrower is the solution for the primary borrower who is unable to meet all the requirements for a loan by the bank.  

Co-borrower qualifications

Those that apply to be a co-borrower must be from the same lineage or family such as your mom and dad, siblings, relatives, or your spouse. In the case that you and your siblings have different last names, you must provide evidence to show that you are both related i.e. house registration documents or birth certificates that show you both have the same parents. In the case of unregistered married couples, you must provide evidence of your marriage status i.e. pictures from your wedding, a filed report to the police station that states that status as a married couple. If you have children together then you can use a copy of your house registration which has the name of your spouse who is the co-borrower on it as evidence as well. However, the final decision of the joint loan approval is dependent on the policy and considerations of the bank.  


There are qualifications that the co-borrower must meet as well and their ability to pay off debt will also be evaluated i.e.; they must not have a monthly income that is lower than what is required. Normally the standard for the co-borrower is at least 15,000 baht or more per monthly income, more importantly they must not already be in too much debt, and they must not have a history of default in loan payments. If a co-borrower does not pass any of these criteria listed, then there is no point for them to be involved in the joint loan. 


Once there are co-borrowers involved in a joint loan it increases the base income of the primary borrower allowing for the approval of the desired loan and flexible payment increments. However, the co-borrowers are now considered joint debtors and are required to pay for half of the joint loan or the amount that is agreed upon. In some cases, the co-borrowers are involved only by name and the primary borrower is responsible for paying off the loan in full within the stipulated time. 


For example, Mr. B (Mr. A’s little brother), has a salary of 45,000 baht, decides to be a part of his older brother’s joint loan. The bank will view it as a request for a single loan and combine both of their incomes together to 70,000 baht (25,000 + 45,000 baht) and after evaluating their ability to pay off a debt to equal no higher than 40% of their annual monthly income it equals 28,000 baht. This allows for a higher probability that the bank will approve the mortgage loan (from this example approximately 17,900 baht in monthly mortgage payments). 

Jointly responsible for the debt

Once they have received their joint loan and they have not specified that they are responsible for each half of the loan then both are responsible for the loan in its entirety. In the case that there is a default in the loan payment then the bank has the right to collect from either or both borrowers. Likewise, if it reached the point where assets were to be repossessed and auctioned off and the total amount received does not cover the sum of the joint loan both borrowers are still liable for paying the outstanding balance of the loan. In the case that one of them does not have the ability to pay (no money) then the other is responsible for paying the outstanding balance in its entirety etc. 


After receiving a joint loan, the question that follows is, “Who holds the rights to all the assets that are put up for collateral?” The answer is all borrowers involved must decide who will take full ownership or if the owner is going to be shared. In the case of joint loans where parents are involved with their child and they would like to give the rights of ownership to their child, if an older sibling would like to give rights of ownership to the younger sibling, or if a husband would like to give rights of ownership to their wife you would simply need to specify on the loan application form before signing the agreement that once the loan is paid off completely who will have ownership over the assets. 


After receiving a joint loan, the question that follows is, “Who holds the rights to all the assets that are put up for collateral?” The answer is all borrowers involved must decide who will take full ownership or if the owner is going to be shared. In the case of joint loans where parents are involved with their child and they would like to give the rights of ownership to their child, if an older sibling would like to give rights of ownership to the younger sibling, or if a husband would like to give rights of ownership to their wife you would simply need to specify on the loan application form before signing the agreement that once the loan is paid off completely who will have ownership over the assets.