Thailand Penalty Interest Rates — New 5% Law Explained for Contracts & Debts

Thailand’s Penalty Interest Law — 2021 Changes

On 11 April 2021, Amendment 23 to Thailand’s Civil and Commercial Code took effect, reducing default interest rates significantly:

Rate Type	Before (pre-2021)	After (2021+)	Legal Basis
Legal default rate	7.5% p.a.	5% p.a.	Section 7
Penalty rate (overdue debt)	7.5% + 2% = 9.5%	5% + 2% = 7% p.a.	Section 224/1
Maximum for non-financial institutions	15% p.a.	15% p.a. (unchanged)	Section 654

Why the change? The old 7.5% rate was established decades ago when market rates were much higher. It created an unfair burden on debtors when actual lending rates had dropped to 2-6%.

Types of Interest Rates

1. Legal Default Rate (Section 7) — 5% per annum

Applies when a contract does not specify an interest rate, or when parties cannot agree on one.

2. Penalty Rate (Section 224/1) — 7% per annum

Applies when a debtor fails to pay by the due date. Calculated as: legal rate (5%) + 2% penalty = 7%.

3. Contract Rate — Negotiable

Parties can agree to any rate, but:

• Individuals/non-financial institutions: Capped at 15% per annum (Section 654). Excess is void.
• Licensed financial institutions (banks, credit card companies): Follow Bank of Thailand regulations. Credit cards are currently capped at 16% p.a.

How to Calculate Penalty Interest

Simple Interest (Standard Method)

Interest = Principal × Rate ÷ 365 × Days Overdue

Example: 500,000 THB overdue for 180 days at 7%:

• 500,000 × 0.07 ÷ 365 × 180 = 17,260 THB
• Total owed: 517,260 THB

Interest Accrual Table (100,000 THB principal)

Duration	At 5% p.a.	At 7% p.a.	At 15% p.a.
30 days	411 THB	575 THB	1,233 THB
90 days	1,233 THB	1,726 THB	3,699 THB
180 days	2,466 THB	3,452 THB	7,397 THB
365 days	5,000 THB	7,000 THB	15,000 THB
2 years	10,000 THB	14,000 THB	30,000 THB

Debtor Rights You Should Know

1. Challenge excessive rates — Courts can reduce penalty interest under Section 224/1 if deemed disproportionate
2. Check the 15% cap — If a private creditor charges over 15%, the excess is void by law
3. Partial payments reduce the base — Any payment made reduces the principal on which interest is calculated
4. Statute of limitations — Interest claims expire after 5 years (Section 193/33)
5. Negotiate — You have the right to negotiate a lower rate or installment plan with creditors
6. Court protection — If sued, the court can adjust the interest rate downward

Common Scenarios for Expats

Condo Purchase — Late Transfer Payment

If you’re buying a condo and the transfer payment is late, the developer may charge penalty interest at the contract rate (often 12-15% p.a. — just below the legal cap).

Security Deposit Disputes

Landlords who fail to return deposits within 7 days of lease termination may owe you interest at 5% from that date.

Business Debts

B2B contracts in Thailand often specify 7.5% (old rate) — these are still valid but courts may reduce to the new 5% benchmark if disputed.

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Related tools: Penalty Interest Calculator | Credit Card Payoff | Loan Calculator