Festive season debt warning

A Malaysian government minister has expressed alarm over the high number of university graduates being declared bankrupt after losing control of their "excessive" credit card spending in the early stages of their working lives. He is not alone. Similar concerns were echoed this week by Thailand's foremost think-tank which warned the spending behaviour of many low-and middle-income earners has become a source of worry because of increasing credit card debt and the growing number of defaults and non-performing loans.

In its latest Social Outlook report, the National Economic and Social Development Board (NESDB) says non-performing personal loans exceeded 56.5 billion baht in the third quarter of this year, making up 21.4% of the outstanding non-performing loans of all financial institutions. It is little surprise that much of this additional drain on household finances came from eagerness to take advantage of the government's popular "first car" and "first home" schemes as well as the desire to splurge on everything from new motorcycles and flashy TVs to smartphones.

NESDB deputy secretary-general Suwannee Khamman said the number of personal loans taken out to buy vehicles jumped by 33.6% from July to September over the same period last year. Loans for new homes increased 10.3% and for other products and services by 30.3%. She quoted Bank of Thailand figures showing outstanding personal consumption loans stood at 2.74 trillion baht, up 20.4% year-on-year and also consecutively higher than those in the first and second quarters of this year.

With the temptations of the festive season fast approaching, these figures are a timely reminder for consumers to spend within their means and have fun doing so. We all know that debt is a fact of life and therefore inescapable. The danger is when it gets out of control and greed takes over. If the debtor has influence, then corruption or fraud are rarely far behind. Some people even tend to gloss over the fact that loans do have to be repaid, usually with hefty interest and penalty clauses.

Sadly it has become apparent that a small but growing number of citizens are resorting to spendthrift lifestyles financed by credit card abuse and personal loan excess. Often this is to keep up with their peers and they are influenced by the celebrity lifestyles they see portrayed on TV or on the internet.

Inevitably this craving for instant gratification and unwillingness to adopt unfashionable, frugal lifestyles and save money for emergencies has brought unwelcome consequences. These include an increase in suicide and self-harm among stressed-out teens and adults who have found out the hard way that nothing in life is free. Dealers say repossession of motorcycles and cars is becoming more frequent. Mental health issues, especially depression, are on the rise as people worry about the rising cost of living, natural disasters, political conflicts, job security and unpaid bills.

There are few scarier plights in today's money-obsessed world than to be blacklisted as a credit risk or be in debt to a vicious loan shark. The desire to keep up with the latest shiny tech toys, dress fashionably, have a beautiful house and car and take overseas holidays is human nature. There is nothing wrong with it unless someone is impatient enough to manipulate credit sources to try and get everything all at once, as has happened in the West. That is the quickest way to turn an innocent dream into a waking nightmare and spend years dodging creditors and lawsuits.