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Household debt rising: 40% of income

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Bank of Thailand warns, as borrowing becomes easier & rises to 40% of income, savings suffer & economic downturn danger arises.

An advertisement for personal loans is seen on a telephone booth in Bangkok on Saturday. The Thai Financial Planners Association has urged monthly debt payments be no more than 36% of disposable income. (Photo: Pattarapong Chatpattarasill)  


Borrowers caught in a debt trap

Buying on instalment plans has become alarmingly easy, and the Bank of Thailand is growing increasingly worried. 8/07/2013

Oranan Paweewun

Low interest rates for an extended period and easy credit are encouraging Thai households to sink deeper into debt. Households are vulnerable to the interest rate hike cycle and economic downturn environments, as most of their household debt service ratio is reaching or even exceeds the 40% threshold.

The household debt service ratio is the percentage of monthly debt payments to gross disposable income. To service debt comfortably even amid financial hardship and in order to qualify for borrowing loans from financial institutions, monthly debt payment obligations should not exceed 40% of one's regular monthly disposable income.

But amid growing economic uncertainty, the Thai Financial Planners Association suggests people be more conservative by capping the maximum debt service ratio at 36%.

The Bank of Thailand has been sounding alarm bells about swelling household debt, and borrowers at the bottom end of the income scale - those making less than 15,000 baht a month - are the biggest concern. But people are still keen on borrowing.

Puntakij Sirisansern, 36, a bus driver for a small garment company, is typical of low-income earners who are saddled with a big debt load. He and his wife earn a combined 25,000 to 26,000 baht a month, and his family, which includes a four-year-old, has hardly anything left for savings at the end of each month.

He is seeking either a personal loan or a hire purchase loan to buy a new mobile phone worth 6,000 to 7,000 baht despite to date having paid only two instalments of 4,080 baht a month on a 12-month motorcycle loan. His family also pays 2,500 baht a month for housing rent.

"A motorcycle is essential. I drive it to work and elsewhere. That's my biggest debt now," said Mr Puntakij.

And it is not just low-paid workers who get caught in the debt spiral. Middle-class professionals also risk becoming mired in the debt trap.

Suphot Paisarnkij, 33, an employee at an IT outsourcing company, and his wife now pay 26,000 baht a month on their mortgage and 7,600 baht a month on a car loan out of a combined monthly income of about 80,000 baht.

He bought a new car worth 523,000 baht in late 2011, paying 40% as a down payment and taking out a four-year loan for the rest, and a new 3.8-million-baht house this year with no down payment.

"I already planned to buy a car, but the government's tax rebate scheme for first-time car buyers encouraged me to speed up the purchase," he said.

Travelling expenses before and after buying the car are about the same, as he and his wife frequently took a taxi home after finishing working late at night before they had their own wheels.

About 1.2 million new cars were registered at the Excise Department for the tax rebate under the government's first-time car buyer programme. The scheme, while helping to boost domestic consumption and new-car sales, has also been blamed for being a major cause of rising household debt.

Prasarn Trairatvorakul, governor of the Bank of Thailand, last month expressed concern about household debt increasing so rapidly.

A recent University of the Thai Chamber of Commerce survey of 1,200 respondents regarding household debt also underscored the central bank's worries. Some 64.5% had average household debt of 188,774 baht, up by 12% from a year before and 147,542 baht in 2009.

Mr Suphot said due to concerns about his ability to afford his mortgage payments, he and his wife have tightened their expenses by not dining out as often as they used to.

"I don't want to run up any more debt if it's not necessary," he said.

But at least the central bank's warning has paid off in the case of one unnamed employee at a media company who seems financially precocious.

She said she bought a 550,000-baht new car last month with a 60-month car loan after she was confident of still having 12,000 a month left for savings after expenses and loan payment.

"I won't purchase my own home as long as my monthly salary remains less than 70,000 baht a month," said the employee, who is single.

She added that she pays 4,000 baht a month in rent for her apartment, not counting utilities.

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ability : a level of skill or intelligence - ความสามารถม กังวลใจ

advertisement (noun): advert; a short piece of video or words with pictures that makes people interesting in buying some product - การโฆษณา

afford : to have enough money to be able to pay for something - มีเงินพอจับจ่าย  ซื้อหา

alarm : a loud noise or a signal that warns people of danger or of a problem - สัญญาณเตือนภัย

amid : at the same time as - ท่ามกลาง

apartment (noun): a set of rooms for living in that is part of a large building - ห้องชุด, อพาร์ทเมนท์

association : an official group of people who have joined together for a particular purpose - สมาคม

average : an amount calculated by adding several amounts together, finding a total, and dividing the total by the number of amounts - เฉลี่ย, ค่าเฉลี่ย

blame : to say or think that someone or something did something wrong or is responsible for something bad happening - ตำหนิ

boost : to increase - เพิ่ม

booth : a small tent or temporary structure at a market, an exhibition or a fairground, where you can buy things, get information or watch something - แผงลอย,ห้องเล็ก, บูธ

borrower : a person who takes money from a person or bank and agrees to pay it back to them at a later time - ผู้ขอยืม

borrowing : taking money from a bank, financial organisation, person, etc. and paying it back over a period of time - การยืม

cap : an upper limit on an amount of money that can be spent or borrowed - ขีดสูงสุด, ครอบ

cause : the person or thing that makes something happen - สาเหตุ

central bank (noun): the main government bank in a country that controls the supply of loans (credit) and the supply of money in the country and provides financial services to the government and other banks - ธนาคารแห่งชาติ

chamber of commerce : a group of local business people who work together to help business and trade in a particular town - หอการค้า

combined : counted together - รวมกัน

comfortably (adverb): without difficulty - อย่างสะดวกสบาย

concern : a worry - ความกังวล

confident : being certain of your abilities or of having trust in people, plans, or the future - มั่นใจ

conservative : careful; cautious; not taking chances - ระมัดระวัง

cycle : the fact of a series of events being repeated many times, always in the same order - วงจร, วัฏจักร, ระยะเวลายาวนาน

debt (noun): an amount of money that you owe - หนี้, นี้สิน

dining : eating (especially dinner) - รับประทาน

disposable income (noun): income left after taxes, etc. have been taken away from it and that you are free to spend or save - รายได้ที่จับจ่ายได้

domestic : inside the country being talked about - ภายในประเทศ

domestic consumption : the buying and use of goods and services within the country   - การจับจ่ายใช้สอยในประเทศ

down payment : a first payment that you make when you are buying something and are going to pay the rest later - เงินที่ชำระราคาครั้งแรก

downturn (noun): a time when an economy or industry is weaker than normal; a fall in the amount of business that is done, lower incomes and employment - แนวโน้มที่ตกต่ำลง เช่นในกิจกรรมทางธุรกิจ

due to : because of - เนื่องจาก

earner : a person who earns money for a job that they do - ผู้มีรายได้

employee : someone who is paid regularly to work for a person or an organisation - ลูกจ้าง

encourage : to cause someone to want to do something - กระตุ้น ให้การสนับสนุน

encouraging : creating hope; positive; indicating something good is likely to happen - ทําให้ใจมีกําลังขึ้น, ชูใจ

environment : a place, including all the physical conditions that affect it - สภาพแวดล้อม, สิ่งแวดล้อม

essential : necessary - ที่จำเป็น

exceed : to be more than something; to go beyond a limit - เกินกว่าที่กำหนด

excise : dealing with taxes made by a government on some types of goods produced and used within their own country - ภาษีสำหรับสินค้าในประเทศ

expenses : money spent in doing a particular job, or for a particular purpose - ค่าใช้จ่าย

express : to tell someone about a feeling, opinion, or aim by speaking or writing about it - แสดงออก (ทางความคิดหรือความรู้สึก) โดยใช้คำพูดหรือการเขียน, พูดออกมา

extended period : a long period of time - ระยะเวลานาน

financial : involving money - เกี่ยวกับเงิน, ทางการเงิน

financial institution : a business which helps its customers manage money, e.g., a bank, insurance company, etc. - สถาบันการเงิน

financial planner (noun): a person who gives people advice about their money, for example helping them choose investments or a pension plan -

financially : involving money - ทางการเงิน

frequently : happening often - บ่อยๆ

garment : a piece of clothing - เสื้อผ้า, เครื่องแต่งกาย

governor : a person who is chosen to be in charge of the government of a state or province or a government agency - ผู้ว่าการรัฐ, ผู้ว่าราชการจังหวัด

gross : being the total amount of something before anything is taken away - ทั้งหมด, ยอดรวม

hardship : difficulty - ความลำบาก

hike : an increase - การเพิ่มสูงขึ้น

hire purchase (noun): a way of paying for goods gradually over a long period. You have the goods immediately, but legally you do not own them until you have finished paying - ให้เช่าซื้อ

household : a group of people, often a family, who live together - ครัวเรือน

income : money that someone gets from working or from investing money - รายได้

instalment (noun): one of many payments made every month/year to pay for something or pay back a loan - งวด, งวดเงินผ่อน, เงินผ่อน

interest rate : the percentage that a bank or other financial company charges you when you borrow money, or the percentage it pays you when you keep money in an account - อัตราดอกเบี้ย

keen : very interested in an activity - สนใจอย่างยิ่ง

load : the amount of work you have to deal with; burden - ภาระ

loan : an amount of money that a person, business, or country borrows, especially from a bank - เงินกู้

major : very large or important - สำคัญมาก

maximum : the most possible - ที่สูงสุด ที่มากที่สุด

media : newspapers, television, radio, etc. - สื่อ

mired : caught in an unpleasant situation that you cannot easily escape from - ซึ่งตกอยู่ในสถานการณ์ยุ่งยาก

mobile (technology) : of devices, especially telecommunication devices, that can easily be moved around, e.g., mobile phones, tablets, notebook computers - อุปกรณ์ซึ่งเคลื่อนที่ได้ง่าย

mortgage : a legal agreement in which you borrow money from a bank in order to buy a house, build something, develop a piece of land, etc - การจำนอง

obligation : something which you must do because you have promised, because of a law, etc. - สัญญาผูกมัด, ข้อผูกมัด

outsourcing : if a company outsources, it pays to have part of its work done by another company - จัดจ้างคนภายนอก

pay off (verb): to be successful and bring good results - ประสบความสำเร็จ

percentage (noun): an amount divided by 100 - อัตราร้อยละ, จำนวนร้อยละ, อัตราต่อหนึ่งร้อย

personal : your own; not belonging to or connected with anyone else - เป็นส่วนตัว

personal finance (noun): managing the money of a family or individual, including budgeting spending, saving and investment, insurance, paying taxes and saving for retirement - การเงินส่วนบุคคล

precocious (adjective): when a child acts in a more advanced way that is usual for their age, advanced, bright, gifted - ที่มีความสามารถมากกว่าเด็กในวัยเดียวกัน

professional : showing that somebody is well trained and extremely skilled - ที่มีความเชี่ยวชาญ

purchase : something that has been bought - ของที่ซื้อมา

qualify (verb): to have what is needed to receive something or do something - เหมาะสม, มีคุณสมบัติเหมาะสม

rapidly : happening quickly - อย่างรวดเร็ว

ratio (noun): the relationship between two numbers or amounts, one number over another number, proportion, fraction - อัตราส่วน, สัดส่วน, อัตราเปรียบเทียบ

rebate : an amount of money that is taken away from the cost of something, before you pay for it - ส่วนลด, เงินภาษีที่ต้องคืนให้

recent : happening or starting a short time ago - เร็วๆ นี้

register : to put your name and other information on an official list in order to be allowed to do something, e.g., vote, study, stay in a hotel etc - ลงทะเบียน

respondent (noun): someone who answers questions - ผู้ตอบคำถาม/แบบสำรวจ

risk : to cause someone or something to be in a dangerous situation - เสี่ยงอันตราย

run up (verb): spend money and increase the amount you owe (run up expenses, run up a bill, etc) -

saddle with : to give someone a responsibility or problem which they do not want and which will cause them a lot of work or difficulty - ทำให้มีภาระ

salary : a fixed amount of money that you earn each month or year from your job - เงินเดือน

scale : a range of levels or numbers used for measuring something - ระบบการวัด

scheme : a plan that is developed by a government or large organisation in order to provide a particular service for people - แผนการ โครงการ

seek : to try to obtain or achieve something - พยายามได้มา

single : unmarried - โสด

sink (verb): to (cause something or someone to) go down below the surface or to the bottom of a liquid or soft substance (past: sank) - จม

spiral : to increase (get worse, etc.) faster and faster -

survey : to ask a large number of people questions to find out their opinions - สำรวจ

swell : to become or cause to become larger than normal - บวม, ทำให้บวม, ทำให้พอง

threshold : the level or point at which you start to experience something, or at which something starts to happen - จุดเริ่มของประสบการณ์หรือเหตุการณ์ใหม่ๆ

to date : until now -

trap : a dangerous or unpleasant situation from which it is difficult or impossible to escape - ถูกกับดัก

typical : having the usual qualities or features of a particular type of person, thing or group - เป็นแบบฉบับ, เป็นสัญลักษณ์

uncertainty : something that you cannot be sure about; a situation that causes you to be or feel uncertain - ความไม่มั่นใจ (ต่อเหตุการณ์ ชะตาชีวิต ฯลฯ), ความรู้สึกไม่แน่ใจ

underscore : to emphasise something or to show that it is important - เน้นย้ำ

urge (verb): to advise or ask someone very strongly to do something or to believe something - กระตุ้น, เร่งเร้า, ผลักดัน

utilities : gas, electricity or water, etc. for people to use - สาธารณูปโภค

vulnerable : easily damaged or harmed - ซึ่งถูกทำลายได้ง่าย

warning : an action or statement telling someone of a possible problem or danger - การเตือน

wheels (noun): car - รถ


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