News Forum - Household debt hits all-time high, nearly 100% of Thais have debt

[Thaiger]

A Thai household debt survey this year revealed that almost every person in Thailand has household debt. But that’s not all, the average household debt hit an all-time high in the kingdom. Today, the Centre for Economic and Business Forecasting of the University of the Thai Chamber of Commerce revealed the survey results, saying nearly 100% of Thai people had household debt, and that it had increased by 3.7% from last year. One family had a debt of about 501,711 baht, which was the highest average recorded in the survey’s 16-year history. One person had to pay a debt of […]

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[palooka]

This showed that Thai people could access credible financial resources.

More fantasy  --- the 10% per month loan sharkes are raking it in, why, because the average person cannot access credible financial resources. 

Even a recent story of a poor soul reported on this forum to be paying 15% per month.

Another story of people jumping off bridges due to financial hardship, ie inescapeable debt.

This survey was probably conducted of people who work in Bangkok, have a good paying job, and maybe struggling to pay for the current increase of cost of living ie pork up 100%+ in one year, used to party Saturday and Sunday but have had to cut back.

1 hour ago, Thaiger said:

One family had a debt of about 501,711 baht,

Most University graduating students have debts to the Govt for education fees in excess of this amount.

 

1 hour ago, Thaiger said:

the Centre for Economic and Business Forecasting of the University of the Thai Chamber of Commerce

These people really need to get out and see the real world/people in Thailand.

[HolyCowCm]

Nearly 100% have debt? Whom are the ones that don't? The ones who are in official duties as MP's and Senators?

[DoUKnowWhoIAm]

14 hours ago, Thaiger said:

If the Thai economy recovers and the number of tourists increases, the household debt situation will get better.

The backbone of Thai economy, Tourism. Yet so mismanaged.

[EdwardV]

7 minutes ago, DoUKnowWhoIAm said:

The backbone of Thai economy, Tourism. Yet so mismanaged.

Remember all the posters who were pointing out the economy would be fine and keep the country closed? How tourism wasn’t important? People who claimed debt would become a huge burden were dismissed. Ahh the good old days. 

[DoUKnowWhoIAm]

2 minutes ago, EdwardV said:

Remember all the posters who were pointing out the economy would be fine and keep the country closed? How tourism wasn’t important? People who claimed debt would become a huge burden were dismissed. Ahh the good old days. 

And tourism is just a tiny fraction of Thailands GDP....

[TSS]

but most of it is formal debt. This showed that Thai people could access credible financial resources.

   Oh that's good- way to put a happy face on it 

 

 

 

 

[ChrisS]

Thailand is certainly not alone in having the level of personal debts rising, certainly Europe is suffering from this and will likely suffer a lot more as winter bites and heating bills come in.

[voyager]

Banks and finance companies have "responsible" lending criteria, eg. borrowing vs income /assets and repayment period. So,  it's difficult to believe that most money is borrowed through them, because a significant percentage of households would not qualify. The lending sharks and pawn shops may be a different story.

If the "official" lenders are providing "nearly 100%" I would be interested to see what percentage of foreclosures, repossessions, write-offs, etc that they are incurring. If there is a problem, that would put it in context.

It would also be more enlightening to see the income (/asset) to borrowing ratio classifications of these households, from the viewpoint that a credit card borrowing by a hi-so may be quite low, relative to their income and asset (e.g. house) valuation. I would also like to know if the borrowing figures include mortgages and other collateral-based lending, where the lender retains a right to repossession of the purchased property. Again, this would be to assess the real risks to both lender and borrower.

As far as the borrowers are concerned, I'm afraid that my own experience, of Thai family and friends, is that I must admit having had to discourage them from  non-essential borrowing, and without always considering a realistic path to repayment.

In a nutshell, this article left me with many questions about whether "official" lenders were acting irresponsibly, and, if so, what degree of default they were incurring. I have no question as to whether the population has a tendency towards high borrowing.

[KaptainRob]

49 minutes ago, voyager said:

Banks and finance companies have "responsible" lending criteria, eg. borrowing vs income /assets and repayment period. So,  it's difficult to believe that most money is borrowed through them, because a significant percentage of households would not qualify. The lending sharks and pawn shops may be a different story.

Majority of debt is house and car loans and Western lending criteria hardly applies.  As long as one has the deposit, often borrowed from family, you can acquire a new car.

Unlike the West, credit cards must be secured by a fixed security deposit, otherwise loan sharks would likely be out of business.

[HiuMak]

18 minutes ago, KaptainRob said:

Majority of debt is house and car loans and Western lending criteria hardly applies.  As long as one has the deposit, often borrowed from family, you can acquire a new car.

Most assets are owned by the banks. Makes them very happy.

[Marc26]

55 minutes ago, KaptainRob said:

Majority of debt is house and car loans and Western lending criteria hardly applies.  As long as one has the deposit, often borrowed from family, you can acquire a new car.

Unlike the West, credit cards must be secured by a fixed security deposit, otherwise loan sharks would likely be out of business.

All credit cards have to be secured?

 

We got one for Nut secured for 75k baht just in case of emergencies 

 

But I just figured because he was young and no credit

 

I had to do a secured CC when I 1st got to Canada because my credit in US did not carry over 

[KaptainRob]

12 minutes ago, Marc26 said:

All credit cards have to be secured?

No, but criteria varies between Banks and obtaining an unsecured CC may be impossible without a permanent verifiable income, eg Government employee or corporate worker.  Foreigners with a work permit may be considered although credit limits are far lower than the meagre Thai limit... set according to monthly repayment ability.

It is therefore easier and far more common, for a 'security deposit' backed card to be issued.  Eg: 50,000k in locked passbook a/c = 50k limit for a Thai or 25k limit for foreigner ... depending on the Bank.

[Faz]

1 hour ago, Marc26 said:

All credit cards have to be secured?

For most Thais and foreigners, yes.
As Rob stated;

2 hours ago, KaptainRob said:

Unlike the West, credit cards must be secured by a fixed security deposit, otherwise loan sharks would likely be out of business.

To obtain a Thai credit card, I must cover the credit limit by means of sufficient fixed funds in a Thai bank account. If I had fixed funds of 500K and a credit card with a limit of 400K and tried to withdraw 200K from the fixed term account, then depending on the conditions of the credit card issue, the credit card limit could be reduced, or they could cancel the credit card.

It's not 'credit' as we are accustomed to in western Countries.

[Fanta]

22 minutes ago, Faz said:

It's not 'credit' as we are accustomed to in western Countries.

Sounds like a debit card you pay interest on. Loan sharks must be jealous of that setup. 

[KaptainRob]

27 minutes ago, Fanta said:

Sounds like a debit card you pay interest on. Loan sharks must be jealous of that setup. 

Exactly.

Only reason for my wife to have a CC is for emergency and/or travel expenses though she pays any balance immediately it falls due each month and ensures no annual fee by completing a minimum number of transactions.

With online shops providing a COD payment option very few card transactions are required.

[Marble-eye]

There is a way to borrow money in Thailand, and I'm sure it would be illegal in most other countries for a bank to loan money in this way.

Let's call it a 'Round Robin' loan, 3 people go for a loan to a bank and sign up for this loan, each person is responsible for each others loan, with that I mean should one of the 3 people default on that loan the other two are responsible for that person's payment, I can only assume if two default the same applies.

But here's the rub, a borrower only stops paying when they die.

 

[Fanta]

11 minutes ago, Marble-eye said:

There is a way to borrow money in Thailand, and I'm sure it would be illegal in most other countries for a bank to loan money in this way.

Let's call it a 'Round Robin' loan, 3 people go for a loan to a bank and sign up for this loan, each person is responsible for each others loan, with that I mean should one of the 3 people default on that loan the other two are responsible for that person's payment, I can only assume if two default the same applies.

But here's the rub, a borrower only stops paying when they die.

One borrower and 2 guarantors? Or 3 loans? 

[Marble-eye]

3 minutes ago, Fanta said:

One borrower and 2 guarantors? Or 3 loans? 

3 people go for a loan to a bank and sign up for this loan, each person is responsible for each others loan, with that I mean should one of the 3 people default on that loan the other two are responsible for that person's payment, 

3 loans.

[Guest1]

35 minutes ago, Marble-eye said:

and I'm sure it would be illegal in most other countries for a bank to loan money in this way.

You would be surprised, the word for google is : 

guarantor 

why should banks have limited business (income), if they can squeeze money out of families, instead of only one person?

 

[Faz]

1 hour ago, Marble-eye said:

3 people go for a loan to a bank and sign up for this loan, each person is responsible for each others loan, with that I mean should one of the 3 people default on that loan the other two are responsible for that person's payment, 

3 loans.

These are known as guarantors. If the loanee defaults on payment, the guarantor becomes responsible for the loan amount. The problem is, the guarantors must have proof of sufficient collateral to cover such loans in the case they also default. Quite often, land ownership is used for this purpose.

It's high risk as many Thai parents can testify to, who acted as guarantors for their children to purchase a car, or that coffee shop business, end up being responsible for the default, can't repay the monthly loan and end up losing their land and home.

[voyager]

5 hours ago, KaptainRob said:

Majority of debt is house and car loans and Western lending criteria hardly applies.  As long as one has the deposit, often borrowed from family, you can acquire a new car.

Unlike the West, credit cards must be secured by a fixed security deposit, otherwise loan sharks would likely be out of business.

Western lending criteria may well not apply, but, surely, the "official" lenders must apply some due diligence, perhaps wrapped in a computer algorithm, to protect themselves from bad debts /defaults...?

If not, I'd have to ask the rhetorical question....what horror stories are currently on their books? 

[KaptainRob]

9 minutes ago, voyager said:

Western lending criteria may well not apply, but, surely, the "official" lenders must apply some due diligence, perhaps wrapped in a computer algorithm, to protect themselves from bad debts /defaults...?

If not, I'd have to ask the rhetorical question....what horror stories are currently on their books? 

Vehicles are often either delivered back to the finance co./bank or dealer and the lender sends it off to auction.   Many buyers simply use another financing source for their next vehicle once they're cashed up with another deposit.

There's always a large number of house and unit defaults especially of the 'investment' variety and banks have a long list of property on their books.  We bought one of 5 lots from a failed company investor who'd done a runner.  It had taken the bank ~10 years to sub-divide and sell off the land but they did ok in the end, so did we.

[Saltire]

1 hour ago, KaptainRob said:

Vehicles are often either delivered back to the finance co./bank or dealer and the lender sends it off to auction. 

Very true but problems can still occur as my wife found out a few years ago.

Her then husband died and when we stopped happy-dancing got a rude awakening with a visit from the local Courthouse. Depite having zero contact for over 10 years, he purchased a large Kubota tractor we guessed about 3 or 4 million baht and had 3 gurantors. His 2 brothers who used the tractor and my wife wiith a forged signature. When he died the finance company did indeed recover and sold the tractor but there was a shortfall of around a million.

We used a lawyer who's sister was a long time friend of the wife who wiped the floor with the brothers lawyer and the finace company lawyer. The debt was allocated to the two brothers. One went straight to jail as he couldn't pay even in installments, the other one started paying but ran out of income, no word on what his fate was.

Our lawyer by the way continues to remind me of the tv cop Colombo. A rather dishevelled, bumbling fool but in the court room he turned out to be a superstar in the legal system, sharp as a tack. Still cost me 80k with a 20% discount for family!

 

[Marc26]

7 hours ago, Saltire said:

Very true but problems can still occur as my wife found out a few years ago.

Her then husband died and when we stopped happy-dancing got a rude awakening with a visit from the local Courthouse. Depite having zero contact for over 10 years, he purchased a large Kubota tractor we guessed about 3 or 4 million baht and had 3 gurantors. His 2 brothers who used the tractor and my wife wiith a forged signature. When he died the finance company did indeed recover and sold the tractor but there was a shortfall of around a million.

We used a lawyer who's sister was a long time friend of the wife who wiped the floor with the brothers lawyer and the finace company lawyer. The debt was allocated to the two brothers. One went straight to jail as he couldn't pay even in installments, the other one started paying but ran out of income, no word on what his fate was.

Our lawyer by the way continues to remind me of the tv cop Colombo. A rather dishevelled, bumbling fool but in the court room he turned out to be a superstar in the legal system, sharp as a tack. Still cost me 80k with a 20% discount for family!

My brother put me down as a reference for something, without asking

A reference is just that............I was not a gurantor and had no responsiblity

 

He defaulted and they kept calling me......

Finally I told the guy if he called me one more time, I would come in and beat him to death