Credit craters, Mortgage tips, Puppy love and mutual funds

My partner and I used credit cards to extend the life of our business. Now the business is finished, but the debt has never stopped piling up. Our income can only pay off our bills and the 10% minimum required payment on the cards. How can we improve our situation?

— Prapatip

ANSWERED BY...Teera Phutrakul, CFP, Chairman, TFPA Taking out a loan with at 20% interest to tide over a business is never a good idea. The cost is never ever going to align, as I am sure the business did not generate more than a 20% return on equity. But what's done is done, so let's concentrate on how to get out of this hole you've dug yourself into.

First, you need to negotiate with your credit card company to replace your existing loan with an instalment loan (also known as a personal loan) or refinance the debt with another provider that can arrange a debt consolidation loan to give you breathing room in paying down the debt.

Instead of having to pay the 10% minimum amount you are paying now, an instalment loan will give you a longer term, usually up to 60 months. Although the interest on the two types of loans are about the same at 18-20% a year, the longer term and fixed payment amount should surely help with cash flow and eventually get you out of debt.

Can you give me some advice about mortgages? I need a mortgage for my first condo soon, and I don't want to repeat the mistakes of others. Thank you.

— CK

ANSWERED BY...Teera Phutrakul, CFP, Chairman, TFPA If you have outstanding credit card debt or personal loans, pay them off first. Young homebuyers often focus on saving as much money as possible for a down payment instead of paying off other debts. Credit card debt and personal loans are expensive and limit your ability to save. The interest rate on credit cards now stands at 20% or quadruple the average mortgage rate of about 5%.

Moreover, credit card debt will limit how much you can borrow. Most banks won't allow your total monthly debt service, which includes payments for credit cards, personal loans, car loans, homeowner's insurance and a mortgage, to exceed 40% of your gross income.

When shopping around for mortgages, be mindful of the "0% teaser" interest rates that some banks offer for the first 6-12 months, with a higher rate in the second year. You need to do a bit of homework and work out the average interest rate for the first three years for a reliable comparison.

Then there is the MRTA, which stands for "mortgage reducing term assurance" or mortgage life insurance. To take out a mortgage, all banks insist you take out an MRTA in case you die or become permanently disabled before the mortgage is paid off. The premium on MRTAs can be quite expensive, so you must factor this into your overall cost.

Finally, read the fine print on who will pay for stamp duties, mortgage registration fees with the Lands Department etc. Each bank has different terms and conditions.

I am 19 and just started investing in a mutual fund. My father taught me to invest, and I love saving through investment. But I'm a little confused about whether a mutual fund or equity investment is better.

— Jane

ANSWERED BY...Teera Phutrakul, CFP, Chairman, TFPA I can't really remember what I was up to when I was 19, but I'm pretty sure equities and mutual funds did not rank high among my interests. It was more likely cars and girls at that age. That said, I bought my first stock when I was 21. It was the IPO of British Telecom back in 1984, which marked the beginning of my love affair with the equities market.

The generic term for common "equity" securities is "stocks" or "shares". People often get confused about this, so you are not the only one. The term "mutual fund" most commonly refers to those collective investment vehicles regulated and professionally managed by qualified fund managers.

Mutual funds are classified by their principal investments. The four largest categories of funds are money market funds, bond or fixed-income funds, stock or equity funds, and real asset funds (commodities and property). Funds may also be categorised as index funds that "passively" track an index or actively managed ones.

Therefore, you need to look for mutual funds that best suit your investment horizon, goals and risk tolerance. Since you have time on your side, I would recommend you use low-cost, well-diversified index funds and invest for the long term and on a regular basis by using dollar cost averaging.

The Thai Financial Planners Association is the certified financial planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted through or the TFPA's webboard at

About the author

Writer: Thai Financial Planners Association