DEBT
The cycle of misery that is ruining lives
By Ekarin Bumroongpuk
The NationPublished on June 10, 2008
Banks urge debtors to let them help out
Suchart and Jongrak Karndee never realised marriage would be this tough. Shortly after tying the knot, the couple (we are not using their real names) started borrowing money from Bangkok Bank.
Suchart is an employee at a private firm and had never faced financial problems until their child was born. Jongrak needed to quit her full-time job to be a full-time mother.
Suchart became the sole provider. As their child grew up, their financial burden became heavier as tuition fees for schooling became a new outlay.
Suchart became more stressed. Each day, he worried about how to make ends meet. The couple applied for personal loans and many credit cards in order to manage their cash flow.
With higher debts, stress led to a miserable relationship. After several quarrels, Suchart and Jongrak are on the verge of divorce.
They are not alone in terms of the difficulties they are facing as rising oil prices have increased overall living costs.
A credit official from a large bank said couples were divorcing because of their financial problems. Banks' customers facing a liquidity shortage and unable to pay debts on time should go to the bank and ask for help.
Bankers said there were bad signs about people's financial problems. The default rate is higher, while instalments are paid every other month rather than every month or not paid at all.
The steady rise in inflation is increasing living costs, banks are raising interest rates and incomes can't cover increased expenditure.
The credit department manager of Bangkok Bank said more customers, wage earners and business people, cannot pay their debts on time.
The general problems of business people are higher costs and difficulties in collecting money from customers.
"One customer sells automobile spare parts and offers high credit. But when the economy is not in good condition, he can't collect money from his customers. Therefore, he has no money to pay bank debts," said the manager.
After four to five months of no payment, the interest will be calculated at a default rate of 15 per cent, compared to the current minimum loan rate (MLR) of 7.25 per cent.
If a customer has to pay interest of Bt200 a day, that amounts to Bt6,000 a month. Over five months, the figure is Bt30,000.
Banks need to talk to customers about debt restructuring and how much they can afford to pay each month. If they can't pay all at once, the bank may let them pay by instalments without interest.
Banks may provide loans to refinance debts and offer a lower interest rate with smaller instalments, the banker said.
But customers should tell the truth to bank staff. Some customers hide their problems. For example, some claim to have only one credit card but actually hold 10. Or they still have to pay an auto-loan instalment but don't tell the bank.
They are afraid the bank will not help them. Actually, the greater the problems, the more likely it is that the bank will help.
People in financial trouble should share their problems with their families. When they understand the problem, they will help.
"In some families, the husband works but the wife is a housewife at home. The husband gets financial problems and asks for loans without telling his family members. He doesn't want to lose face with the family. So the wife still spends the same and doesn't try to save," said the manager.
Other large banks had similar stories.
The credit development department officer of Siam Commercial Bank said more customers were facing problems with payments. Credit-card customers need to pay at least 10 per cent of their spending amount.
"Right now, the banks help a lot of credit-card customers by allowing them to pay at least 5 per cent of the spending amount but if they still can't pay, we need to put them on the bad credit list," said the officer.
Ratanachai Nantapramote, managing director of Nava Leasing, said his company would seize a car as a last resort. "There is a solution to your problem. But first you should help yourself by not taking on new debt and saving more. Don't ignore the problem before it's too late," he warned. -->
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