GSB takes out car title loans to keep interest rates low

The GSB logo exhibited at a Money Expo. The state-backed bank is introducing car title loans to pressure interest rates. (Photo by Patipat Janthong)

The Government Savings Bank (GSB) plans to enter the car title lending market with a focus on retail loans worth up to 200,000 baht per borrower.

The bank’s penetration of the auto title loan market is aimed at lowering the interest rates applied to this lending segment, Chairman Vitai Ratanakorn said.

The Bank of Thailand cut car title loan interest rates to 24% from 28% on August 1, but the rate remains high, Vitai said.

GSB plans to cap interest on car title loans at 18% plus or minus no more than 2%. The 18% rate will be assessed based on customer profiles, Vitai said.

For example, a car in good condition may receive an interest rate of 16%, while older models or vehicles with risk may see 2% interest added to the 18% rate.

The 18% interest rate for car title loans, classified as an unsecured loan, is lower than the interest rates charged by non-banking companies.

But GSB can still make a profit because the bank’s existing unsecured loan products have interest rates below 18%, Mr Vitai said.

Non-bank companies involved in car title lending have a net interest margin of 15-20%, higher than the NIM of 2% in public banks and 3% in commercial banks, he said. .

GSB is evaluating a potential joint venture partner in the automotive title lending business.

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