A 25-year-old woman's struggles with debt of 307,000 baht went viral on social media recently when she asked for advice on how to manage what she owed. She earns 22,000 baht per month, with 6,000 baht going towards rent and 3,000 baht monthly for motorcycle loan payments.
The principal debt of 307,000 baht is the total of six unsecured loans, including credit cards and personal loans from six different financial institutions, including both banks and non-banks. She did not provide details on her monthly instalments, interest rates, or whether her debt is in good standing or classified as a non-performing loan (NPL).
In response to her request for help, she received much advice on social media platforms. If you find yourself in a similar situation, there are several tools available to assist you in escaping the debt cycle.
Debt Clinic
Debt Clinic is a restructuring programme for unsecured loans supervised by the Bank of Thailand. It is designed for borrowers with NPLs from credit cards, cash cards and personal loans. Operated by Sukhumvit Asset Management (SAM), the country's second-largest asset management company, Debt Clinic offers a structured solution for managing debt.
The clinic offers special interest rate adjustments ranging from 3-5% annually, depending on the debt instalment repayment plan, with a maximum repayment period of 10 years.
The programme extends to retail NPL borrowers aged up to 70 with total debt burdens not exceeding 2 million baht.
Credit cardholders and personal loan borrowers classified as NPLs can address their debt burden through the clinic's restructuring programmes, tailored to their monthly affordability, said Nartnaree Rattapat, president of SAM.
They are allowed to assess their affordability and choose an appropriate repayment plan via the Debt Clinic website, which offers short-term, medium-term and long-term options. Short-term debt repayment is within four years, offering an annual interest rate of 3%.
Medium-term debt repayment is from 4-7 years and offers an annual interest rate of 4%.
Long-term debt repayment is from 7-10 years with an annual interest rate of 5%.
"NPL borrowers interested in joining the debt clinic can assess their affordability by reviewing debt instalment schedules on the debt clinic website," said Ms Nartnaree.
"These schedules outline repayment periods ranging from short term to long term."
The clinic's special interest rates and flexible repayment plans can help borrowers struggling with unsecured loan NPLs, helping them regain financial stability, she said.
For example, for the 25-year-old woman mentioned above, after deducting her rent of 6,000 baht and motorcycle payment of 3,000 baht from her monthly income of 22,000 baht, she is left with 13,000 baht.
By finding a cheaper apartment, she could increase her disposable income. In this scenario, she could opt for a total debt burden ceiling of 500,000 baht under a debt restructuring programme, choosing either a medium-term or long-term debt repayment plan.
For the medium-term option, spanning 4-7 years, she will be charged an annual interest rate of 4%, resulting in a monthly debt instalment of 6,900 baht.
For the long-term option, the annual interest rate is 5%, resulting in a monthly debt instalment of 5,300 baht.
Bank of Thailand's governor, Sethaput Suthiwartnarueput, second from left, pays a visit to the central bank's Debt Clinic service at the 2024 Money Expo in Bangkok.
Persistent Debt Scheme
The central bank's persistent debt (PD) scheme offers another way for personal loan borrowers to reduce their debt burden. The scheme is divided into two categories: general PD and severe PD, both categorised as instalment loans and classified as performing loans.
General PD borrowers are defined as those who have been in debt for three consecutive years, while severe PD borrowers have been in debt for five consecutive years, with a minimum monthly income of 20,000 baht for debtors of banks and 10,000 baht for those borrowing from non-bank institutions.
Suwannee Jatsadasak, assistant governor for the supervision group at the central bank, said this scheme is available to long-term borrowers who meet the PD criteria and are paying more in interest than in principal. Participants in the PD programme enjoy a reduced interest rate of 15% per year, which is lower than the ceiling rate of 25% under personal loan regulations.
Personal loan borrowers looking to lower their interest rates, reduce monthly repayments, and exit the debt cycle faster can apply for the PD programme at 37 participating banks and non-bank institutions.
Both the Debt Clinic and PD schemes primarily focus on unsecured loan products. Thailand's household debt-to-GDP ratio is around 91%, amounting to 16.3 trillion baht, with unsecured loans making up 28%.
Under central bank regulations, the interest rates for credit cards and personal loans are capped at 18% and 25%, respectively.
Debt Clinic by Sukhumvit Asset Management, the country's second-largest asset management company, offers a structured solution for managing debt.
Consolidation Programmes
Many financial institutions, both banks and non-banks, offer debt consolidation programmes, also known as debt balance transfers, as a means of refinancing debt.
Under the debt refinancing concept, banks allow borrowers to consolidate multiple debts into a single amount. They then provide a new loan to repay and close existing loan accounts. Borrowers who opt for this programme can benefit from lower interest rates on the new loan and improved monthly liquidity, thereby easing their debt burden.
Banks often offer promotional campaigns with special interest rates to attract borrowers to their debt refinancing programmes. However, the conditions of these programmes vary, including applicant qualifications, minimum income requirements, loan types, interest rates, credit limits and repayment periods.
For example, some banks reduce interest rates for these programmes for existing payroll customers or civil servants, with minimum income ranging from 20,000 to 50,000 baht per month.
TMBThanachart Bank (ttb) offers a debt consolidation programme for unsecured loans called ttb welfare loan, with interest rates starting at 7.99% per year and a maximum credit line of five times a customer's monthly income.
There are several tools available to assist in managing debt.
The bank also provides debt consolidation for secured loans with special interest rates.
In addition, ttb offers a debt solution platform called "Pichit Nee" (defeat debt), which provides financial literacy resources to help Thais manage their personal finances and debt. The platform includes personal financial checks, online financial courses, debt solutions and promotional campaigns.
"As part of responsible lending practices, the bank aims to promote good financial health among Thais. We believe the Pichit Nee platform will assist them in managing financial plans, enhancing financial discipline and accessing higher-quality loans," said Thakorn Piyapan, president of ttb.
Krungthai Bank (KTB), the country's largest state-owned commercial bank, offers a debt consolidation scheme for government officials with a minimum income of 30,000 baht per month. This programme covers both secured and unsecured loans from KTB and other financial institutions.
Under the programme, KTB offers a fixed rate of 3.5% per year for the first three years for mortgages and 6.75% per year for the entire term of unsecured loans.
CIMB Thai Bank (CIMBT), Kiatnakin Phatra Financial Group (KKP) and Thai Credit Bank offer the same interest rate of 9.99% per year for personal loan consolidation programmes.
Minimum income requirements vary: CIMBT and KKP require applicants to have a minimum income of 20,000 baht per month, while Thai Credit requires 30,000 baht per month.
The special rates apply for the first three months at KKP, the first five months at Thai Credit, and the first 12 months at CIMBT.
Borrowers interested in debt consolidation programmes are advised to carefully study the conditions and details of each scheme to effectively reduce their financial burden and solve their debt problems.
