Default interest runs from the day the debtor falls into default, which differs from contractual interest running from the start of the debt. Where the contract fixes no rate, the law supplies one.
This calculator uses simple interest, which is the general rule for default interest.
Result
An estimate for guidance, not advice on your matter.
When default begins
Where a debt falls due on a calendar date, the debtor is in default as soon as that date passes, with no demand required. Where no date was fixed, default begins when the creditor demands payment and none is made. The demand letter therefore fixes the date interest starts, so proof of sending it should always be kept.
The ceiling on rates
- Where the contract fixes no rate, the statutory rate is 3 per cent per year, with a further 2 per cent added on default, giving 5 per cent per year.
- On a loan of money between private parties, interest above 15 per cent per year cannot be charged. The excess is void and the lender may commit a criminal offence.
- Financial institutions supervised by the Bank of Thailand work to ceilings set by their regulator, which differ from the rule for private lenders.
Compounding
Default interest cannot be compounded except where the law allows it, for example where interest has been outstanding for at least a year and the parties agree in writing to add it to the principal. A clause providing for monthly compounding is usually unenforceable as written.
Debts payable by instalments
Where a debt is payable by instalments and one instalment is missed, default interest runs on the principal of that instalment alone, not on the whole outstanding balance. A clause charging default interest on the entire balance is unenforceable as to the excess.
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An estimate at the statutory rate. The date default began is a question of fact that parties often dispute, and some debts have their own rules. If a contract or demand letter already exists, send it to the firm for review.
Sources
- Civil and Commercial Code, section 7: interest of 3 per cent per year where no rate is fixed by juristic act or express provision of law, reviewable by the Ministry of Finance every three years.
- Civil and Commercial Code, section 224 (default interest at the section 7 rate plus 2 per cent per year) and section 224/1 (instalment debts), both as amended by the Emergency Decree Amending the Civil and Commercial Code B.E. 2564 (2021), in force from 11 April 2021.
- Civil and Commercial Code, section 655 on when interest may be added to principal.
- Act Prohibiting Excessive Interest Charges B.E. 2560 (2017), section 4: no more than 15 per cent per year on a loan of money.
- Courts of Justice