From Causes to Solutions: Tackling Household Debt in Thailand

 

 

Household debt in Thailand has long been elevated and escalated during the COVID-19 pandemic. The debt-to-GDP ratio peaked at 95.5% in early 2021 before easing slightly to about 90%.

 

Consumption loans account for roughly 77% of household borrowing, while business loans make up only 18%. Unsecured loans, including credit card and personal loans, represent almost 30% of total debt [ Q3/2025 BOT’s credits for household sector by objectives].

 

Many households begin borrowing at a young age, often without fully understanding loan terms, and rely on minimum credit card payments—practices that contribute to persistent debt accumulation.

 

Insufficient emergency savings and limited debt management mechanisms have left Thai households vulnerable to income shocks.

 

During COVID-19, debt-to-GDP rose as borrowing increased and GDP fell. By Q3 2024, credit cards had the highest NPL ratio (4.61%) and auto loans had the highest special mention ratio (15.69%).

 

As of September 2024, 64% of NPLs were unsecured loans, with 26% of 25–29-year-olds holding at least one NPL account[ BOT data & Xu, Y. (2025). “Household Deleveraging: International Practices – Thailand”, IMF eLibrary.].

 

Despite modest declines in 2025, NPL and SM ratios remain elevated across multiple loan categories.

 

If we look for the causes and roots of the debt problem, it can be traced to two main factors: at the individual level, a lack of financial knowledge and reckless spending behavior.

 

Asymmetric information and present bias, with unsustainable and fluctuating income, could worsen the problem.

 

 

 

Moreover, societal norms such as ‘A must-have’ mentality or fear of missing out (FOMO) put pressure on people to keep up with trends, lifestyle standards, and social media, which leads to impulsive spending, the misuse of digital credit (online shopping with pay later), and risky financial behaviors.

 

Preventing over-indebtedness requires greater awareness of debt burden, stronger borrower protection, and improved financial literacy.

 

Authorities may consider restricting aggressive credit card marketing, imposing interest rate caps, promoting responsible lending guidelines.

 

Financial institutions should be encouraged to provide loans based on repayment capacity, while integrating mechanisms that support income generating and strengthen financial discipline.

 

Moreover, certain financial behavior changes require behavioral interventions or policy nudges to effectively encourage improvement.

 

Several measures have been introduced to address Thailand’s household debt problem. Debt restructuring initiatives, such as the Debt Clinic, assist in rescheduling non-performing loans, while the Khun Soo, Rao Chuay project reduces installments and provides interest forgiveness. 

 

 

 

 

Since 2024, Responsible Lending guidelines have required creditors to assess borrowers’ affordability and offer restructuring options before loans become overdue.

 

More recently, the Pid Nee Wai Pai Tor Dai program has been implemented to fast-track debt clearance for borrowers with small outstanding NPLs.

 

However, debt restructuring should exclude the rollover of impractical loans, which would otherwise create moral hazard. Most measures focus on assisting borrowers with NPLs.

 

Yet it raises the question of whether individuals with good repayment behavior must first default to qualify for support, or whether additional incentives/rewards should be offered to those who consistently meet their debt obligations.

 

 

 

 

*This opinion expressed in the article is solely that of the author, and does not necessarily reflect the views of any organization to which the author belongs.

 

 

 

Dr Chayanee Chawanote is an assistant professor at the Faculty of Economics, Thammasat University. Her research focuses on poverty and inequality, education, farmers’ debt and financial inclusion. Her new book, Empirical Development Economics and Policy Analysis, offers econometric tools for evidence-based insights into impact evaluation and field experiment in Development Economics.