Schemes are available to help borrowers slowly crawl out from their obligations.
Schemes are available to help borrowers slowly crawl out from their obligations, writes Oranan Paweewun
Thai household borrowing rose to 13.2 trillion baht at the end of September 2019 from 12.8 trillion baht at the end of 2018, with the ratio relative to GDP climbing to 79.1% from 78.6%. These figures suggest many people are drowning in debt. Those already stuck in a debt spiral, making minimum payments on credit cards or having defaulted on personal, credit or cash card loans, are encouraged to consider the Debt Clinic.
DEBT CLINIC
The Debt Clinic, managed by the Financial Institutions Development Fund’s wholly owned subsidiary Sukhumvit Asset Management (SAM), acts as an intermediary between debtors and lenders in restructuring bad personal, credit or cash card loans owed to 35 participating banks and nonbank financial institutions in return for a lower interest rate.
Those whose loans turned sour before Jan 1, 2020, meaning they are on the National Credit Bureau’s blacklist for debts more than 90 days past due, are eligible to join the scheme regardless of how many creditors they owe. These lenders must be among the 35 participating financial institutions.
The 35 financial institutions comprise 17 banks and 18 non-bank financial institutions.
Participants must be 65 years old or younger, and their cumulative principal plus unpaid interest must not exceed 2 million baht. Even those with court rulings on defaulted debt cases can participate in the Debt Clinic scheme.
Applicants can sign up on the clinic’s website or the Line app, at the clinic’s office or at SAM’s four branches in Chiang Mai, Phitsanulok, Khon Kaen and Surat Thani provinces.
The application process includes a preapproval form to join the programme. The application requires financial information, such as monthly income, extra earnings, expenses and existing debts, which are used in calculating the payment terms of the restructured debts.
Participants can submit the documents through the website, or at the Debt Clinic’s office or SAM branches.
The clinic takes a few days to process the submitted documents. It will then set up a meeting among its employees to discuss the terms of payment, after which approval of the payment terms will be sought from the creditors. When the whole process is completed, the participant will be called up to sign the debt restructuring agreement.
The restructured debt carries interest rates of 4-7% for up to 10 years — far below the central bank’s ceiling interest rate for credit cards of 18% and personal loans of 28%. The lenient conditions and low interest rate are meant to ease participants’ financial burden.
Participants are only subject to principal payment, while accrued interest and fines will be returned when the debt is paid off.
Repayment is based on monthly income minus expenses and other debt payments declared to the Debt Clinic, while debtors’ disposable income and expenses are determining factors for interest rates. Participants with low repayment ability are subject to lower interest rates.
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The Bank of Thailand aims for an additional 8,000 Debt Clinic participants by the end of this year. THANYANIT NIYOMKARN Assistant, Bank of Thailand’s supervision group
For example, Mr Somchai, who earns monthly income of 50,000 baht and had defaulted on debt of 1 million baht, can expect to pay 1,066.66 baht a month for 120 months, or 1.27 million baht total when he is approved to join the scheme, according to the clinic’s rough calculation available on its website.
However, participants must sign an agreement that they will not run up additional debt for at least five years. In the case of unexpected events, such as losing their job or encountering additional expenses, participants are advised to negotiate with SAM for a possible repayment suspension until they are back on their feet.
Thanyanit Niyomkarn, assistant governor for the central bank’s supervision group, said the Bank of Thailand aims for an additional 8,000 Debt Clinic participants by the end of this year.
At the end of last year, 3,194 defaulted debtors holding 13,000 credit and cash cards loans participated in the scheme.
CREDIT CARD REFINANCING
For those struggling to service their credit card debt, though their loan is still considered performing, the Government Savings Bank (GSB) offers a refinancing scheme meant to ease their financial burden and get them out of debt faster given a cheaper rate.
The GSB Refinance scheme with a 48-month instalment plan offers a balance transfer for credit cards in a range of 10,000-100,000 baht to loan applicants, said Chatchai Payuhanaveechai, president and chief executive of GSB.
Participants in the scheme are allowed to pay 2.5% of the balance transfer per instalment until the debt is paid off, but not less than 500 baht a month. According to GSB, participants are required to pay a minimum of 250 baht a month over the course of 48 months for every 10,000 baht of debt.
GSB Refinance participants are charged 8.5% annual interest for the four years if they are state or state enterprise employees or salaried workers, and 10.5% annually if they are self-employed workers, small and medium-sized enterprises, or entrepreneurs.
Participants in the scheme must have regular income with at least a six-month work record and be 20-60 years old. Business owner participants must have operated their business for 12 months, and their maximum age is set at 70.
A minimum monthly income of 15,000 baht, a good repayment history for 12 months and no late payment for more than 30 days are required.
Those qualified for the scheme are subject to a 5% annual management fee waiver for four years.
The GSB Refinance scheme runs through June 30.
The Bank of Thailand has relaxed the minimum amount due on credit cards to below 10% of outstanding balance as part of relief measures for those adversely affected by the coronavirus outbreak.
Take Krungsri Consumer, a credit card issuer under Bank of Ayudhya, as an example. It is offering a grace period for principal of up to three months and a reduction of the minimum amount due on credit cards to 5% from 10% of outstanding balance to those working in industries hit by the virus.
A grace period of up to three months for principal repayment and a lower minimum amount due, down to 3% from 5%, are available for Krungsri Consumer’s personal loan borrowers who work in industries ravaged by the pandemic.