The proportion of heavily indebted borrowers has soared to 30% of all unsecured loan debtors, according to ttb analytics.
The figure includes both credit card and personal loan borrowers, with credit limits of 10-25 times their monthly income.
As a result, more than 50% of their income is used for debt repayments, said the economic analysis arm of TMBThanachart Bank.
Sixty-two percent of households are indebted because of inadequate savings for emergencies.
In addition, 50% of households exhibit weaker debt repayment ability if their incomes are reduced by 20% from the regular amount, said Naris Sathapholdeja, the head of ttb analytics.
Around 4.5 million accounts were classified as non-performing loans (NPLs) during the pandemic, accounting for 45% of the total outstanding loan balance.
Most distressed debts involve individual borrowers in the farming sector.
About 4,600 households have signed up for the debt restructuring programmes of state financial institutions. Around 42% of individuals have taken out an informal loan or borrowed from a loan shark, with the average informal loan equal to 54,300 baht per person.
“The amount owed to loan sharks by retail borrowers is quite high as the majority cannot access loan services of the banking industry, mainly due to income uncertainty,” said Mr Naris.
In other cases, he said, borrowers might have used up their maximum credit line from a bank or credit card firm and opted to borrow from loan sharks.
According to the Bank of Thailand and ttb analytics, individual borrowers are becoming indebted at a younger age. Around 58% of the total are early-career workers aged 25-29, while 25% are classified as NPLs.
The younger generation accounts for the majority of loans, which include personal, auto, motorcycle and credit card loans.
Mr Naris said household borrowers are indebted for longer periods. Some 60% of total retail borrowers, who are older than 60, are still indebted, with a debt of around 400,000 baht per person on average.
Prolonged indebtedness is partially due to the minimum payment requirement. Around 40% of credit card and personal loan borrowers opt for the minimum debt repayment. As a result, their debt period is extended and they cannot exit the debt cycle, he said.
During the pandemic, the Bank of Thailand approved a reduction in the minimum monthly payment to 5% of the outstanding balance, from 10% earlier. It now wants to raise the rate to 8% next year and 10% in 2025 as the economy is recovering.
Mr Naris said 68% of total household debt is unsecured loans including credit card and personal loans at 39% and 29%, respectively.
Moreover, these loans are not used to generate income but for routine spending instead of investment.
The country’s swelling household debt is also attributed to the higher debt burden. Around 32% of total retail borrowers have four loan accounts per person, ttb analytics has found.