Debtors told to limit their repayments

This would minimise the risk of their getting into financial difficulty and defaulting at a later date, and therefore reduce the nation’s overall household debt.
Household credits, extending from credit-card debt to personal loans, have showed signs of increased repayment inability, particularly among low-income earners, the association said yesterday.
“It’s [currently] more difficult to avoid getting into debt. Therefore, the best way for all is to learn about and plan good debt management in order to relieve their debt crisis,” said TFPA president Teera Phutrakul.
If monthly debt repayment is higher than 36 per cent of total income, this could affect future debt repayment and lead to their filing for bankruptcy, he said.
Solving a debt problem should start with ascertaining which portion of a household’s debts is unnecessary and could be restructured into cash to lower the overall burden.
Debt restructuring could be done through refinancing sources, such as employee welfare loans, he said.
Non-wealth-creation and high-interest debts should be repaid first, as most of them stem from daily consumption through short-term credit-card spending or personal loans with high interest rates, he added.
Monthly repayment should be undertaken at a higher level than the minimum amount required in order to lessen the principal sum, aside from interest, as this would help borrowers to escape the vicious circle of indebtedness more easily, the TFPA suggested.
Expenses and income should be managed and recorded in an account, as this helps debtors consider unnecessary expenses.
People should spend only on necessary items, and not on luxuries – particularly those goods touted via advertisements and promotional campaigns – while consuming only staple items, thus leaving more savings for unexpected situations, said the association.

INDONESIAN RISK
Meanwhile, Standard and Poor’s Ratings Services warns that underlying credit risks are building up for Indonesian banks, whose annual loan growth has been in excess of 20 per cent since 2007 on a robust economy and positive business sentiment.
The rating agency said the main threat to asset quality stemmed from increased leverage in the private sector, aggressive regulatory measures to promote economic growth, and structural weaknesses in the banking industry.
All these factors could undermine the ability of the private sector to service debt in the long run. Banks have also become more vulnerable to shifts in interest rates, said S&P.
Indonesian banks’ special-mention loans – those overdue for up to 90 days but yet to turn bad – have been increasing since 2011. This suggests that borrowers are increasingly experiencing repayment difficulties.
However, the ratio of non-performing loans declined to 1.9 per cent last year from 6.1 per cent in 2006, partly reflecting the denominator effect of rapid loan growth.
S&P expects the improvement in loan quality for Indonesian banks to moderate over the next few years.
Meanwhile, households in Singapore are among the most indebted in Asia relative to what they earn, according The Straits Times.
Referring to a Standard Chartered report this week, the newspaper said households had borrowings worth 151 per cent of their annual income last year, second in the region only to Malaysia, with debt at 182 per cent of income.
This is mainly because consumers in Singapore take on large amounts of property debt, amounting to 111 per cent of household income, the highest level in the region.
On the bright side, households have a robust buffer of financial assets from high savings, so their debt levels are relatively low compared to these assets, the bank added.