Learn About Debt
Understanding debt and its dangers.
The Problem With Debt
Imagine it's the middle of the month and the bills keep coming. You've already paid your minimum payment on your motorcycle, three credit cards, and the new iPhone you bought yourself for your birthday last year. But you also owe money to a friend, a relative, and a local loan shark. They'll all be calling soon, but a big part of your salary is already gone. Your next rent and electricity bills come due before you get paid again. You still have to buy gas and food for the next two weeks, but the refrigerator and your gas tank are both almost empty.
Then your child needs new shoes because they fell apart playing soccer. The motorbike is making a weird sound that you know should get fixed, and a family member asks you for help because the bank is about to take the new truck they bought and couldn't afford. You open your banking app over and over again expecting the balance to be different and wonder, “Why do I work so hard, but never seem to get ahead?!” You may be able to make all the payments and buy enough food this month, but there's almost nothing left afterward. Nothing for emergencies. Nothing for your child's future. Nothing for the dreams you once had. So when another problem comes, you borrow again.
Debt doesn't just steal your money.
It steals your peace and keeps you stuck in the same cycle month after month.
If you can relate to this story, you're not alone! You are not a bad person if you have debt or if you're struggling to repay it. We've all made mistakes with money. The goal of this website is to give you hope that freedom from debt is possible!
Debt is not a tool for building wealth. Every payment you make to a lender is money that could have been building your future, but instead is going to someone else. It slows your progress and holds you back. The best tool for building wealth is your income, but if you're sending huge chunks of it to lenders, the tool can't do the job it's supposed to do. Many people want you to believe that debt is the answer to becoming wealthy. You might hear this from friends, relatives, advertisements, and the bank. But for many people, debt is nothing but a tool for digging a deep hole they feel like they'll never climb out of. To learn more about how to get out of debt, visit the debt snowball page. We also have a helpful calculator to get you started.
Types of Debt
Secured Debt
Backed by something you own, like a car or house. If you stop paying, the lender can take that item back.
Unsecured Debt
Not tied to an item, like credit cards, medical bills, or personal loans. Because it's riskier for lenders, it often comes with higher interest rates.
Revolving Debt
Lets you borrow again and again, like a credit card. Your available balance replenishes as you pay it down.
Nonrevolving Debt
A one-time loan you repay over time, like a car loan or mortgage. Once repaid, the account is closed.
0% interest does not mean free. You still have a monthly payment. Small payments hide the true cost. Missing payments leads to fees or other problems. And 0% offers tempt you to overspend on things you wouldn't normally buy. Debt is one of the most aggressively marketed products in the world. Why do stores advertise the monthly payment instead of the total price? Because they make more money when you finance the purchase. Why do banks push loans more than investment products? Because they earn more from your debt than from your savings.
Typical Loan Interest Rates in Thailand
Some debt carries more risk than others. Mortgages and school loans are typically lower risk. Vehicle loans are riskier because you pay interest while the asset loses value. High-interest consumer debt is the most dangerous, including credit cards, personal loans, loan sharks, and non-bank financing. No matter what the interest rate is, all debt carries risk. No debt brings peace of mind.
| Loan Type | Annual Rate |
|---|---|
| กยศ (Government Student Loan) | ~1% |
| Mortgage (Home Loan) | ~5–8% |
| New Auto Loan (Bank) | ~6–10% |
| Used Auto Loan (Bank) | ~8–12% |
| Credit Card | Up to 16% |
| Personal Loan (Bank) | Up to 25% |
| Personal Loan (Non-Bank) | ~18–28% |
| Illegal Loan Sharks | ~120–240% |
*Estimated rates from research; actual rates may vary.
School Loans
If you can earn a degree, license, or certification that increases your skills and income, that's a wise goal. School loans typically have some of the lowest interest rates compared to other types of debt, and you are gaining knowledge that can increase your earning potential, but you should still try to avoid school loans if possible.
Debt Too Large for Income
A student borrows ฿600,000 to earn a degree that typically leads to a starting salary of ฿12,000/month. The math doesn't make sense!
Prestige Over Practicality
A private university costs ฿700,000 when a public university offering the same degree costs ฿150,000. The degree and future income may be the same. The debt is very different.
Passion Without a Plan
Someone studies a field they love but never checks to see what kind of jobs are available. They later find out there are no jobs! Research the field and talk to someone working in it before committing to a field of study.
กยศ loans charge about 1% interest and the interest does not compound, making them safer than most other loans. If you must borrow for school, this is the safest option. But low interest does not mean keep it forever. Becoming debt-free will accelerate your wealth building.
Remember: government loans are enforceable. The government has strong collection powers and can garnish wages. Employers can be instructed to withhold repayments from your salary.
Mortgage Loans
A mortgage is a long-term loan used to buy property. The house is collateral, which means if you stop paying, the bank can take the house. Until the loan is fully paid, the bank has a legal claim on the property. You don't fully own it yet.
Banks often use terms like MRR (Minimum Retail Rate) and MLR (Minimum Loan Rate). Usually, you get a lower promotional rate for the first few years. After the promo period, your rate often becomes MRR minus a discount. Rates change over time following Bank of Thailand policy. Recent Thai mortgage rates have ranged from about 5% up to around 7%.
To calculate a mortgage payment and see how small decisions can save you enormous amounts of time and money, check out our mortgage calculator.
When to Buy: Buy only after you have paid off your consumer debt, built an emergency fund, and saved a 20% down payment. It also makes the most sense if you plan to stay in the area for at least five years. Keep your mortgage payment under 25–30% of your net income. The bank might approve you for a bigger loan, but that doesn't mean you should borrow that much. Keep your mortgage payment manageable so you have breathing room in your budget.
When to Rent: You should continue renting while you're paying off consumer debt, building an emergency fund, or saving up for a larger down payment. It's also wise to rent if you aren't sure how long you'll be living in an area.
Vehicle Loans
Vehicles are not simply transportation decisions. Sometimes they are one of the biggest wealth-building or wealth-destroying decisions you will ever make. Yet most people never think about their vehicle this way. Why? We love vehicles.
Many people are constantly in vehicle debt because they think it's normal. If you get a vehicle loan, you're paying interest and losing value at the same time. It's like being punished twice. New cars typically lose ~10% of their value in the first month, 20% in the first year, and as much as 60% within 5 years. At around the 5-year mark, the rate of decline slows. Most cars remain reliable for many years so you don't need a new car for reliable transportation.
*Estimated depreciation varies by vehicle model, age, condition, mileage, and market demand.1
Pros
Maintenance is cheaper. Electricity is often 50–75% cheaper than gasoline per kilometer. Better for the environment. Quieter ride.
Cons
Insurance is more expensive. Depreciation is higher. Batteries are expensive to replace. Thailand's charging infrastructure is still developing. The used EV market is still small.
EVs may become a larger share of the market over time, and they do cost less to fuel and maintain. But for someone focused on getting out of debt today, a reliable used gasoline vehicle that is cheap to buy and easy to keep running is the safer financial choice.
Credit Cards
A credit card is not free money. It is a short-term 0% loan that can quickly turn into a long-term 16% interest loan. The bank pays today and you promise to pay the bank later. If you pay the full statement balance every month, it can work as a convenience tool. If you carry a balance, it becomes one of the most expensive forms of consumer debt.
You Tap, Swipe, or Insert
The bank pays the store. Now you owe the bank. At this moment, it feels simple and painless.
The Grace Period
If you pay the full balance by the due date, you pay 0% interest. This is why some people use credit cards as a convenience tool.
Minimum Payment & Interest
Thai credit cards typically require a minimum payment of 10% of the outstanding balance, unless temporary relief measures allow a lower minimum. Under Bank of Thailand rules, total interest, penalties, service charges, and fees are capped at 16% per year.
The Debt Spiral
You lose your income or face an emergency. You can't make the minimum payment. Late fees pile up. Interest keeps accumulating. Your credit record is damaged. Collection calls begin. Legal action becomes possible.
Credit cards change how we feel about spending. Many studies show that people spend 12–18% more when using credit cards instead of cash.[1] Why? Tapping a card feels painless. Research has shown that paying with a credit card reduces the psychological "pain of paying."[2] Cash is tangible. You physically give away your money and feel the loss immediately. When something feels easy, we tend to do more of it. Visit our page about budgeting to learn more strategies for spending less and getting out of debt.
If you can't pay your full balance, the bank will earn far more from your interest than you will ever earn in rewards. Credit card rewards are not designed to make you richer. They are designed to encourage you to spend more. The more you swipe, the more money the bank makes.
Example: A credit card gives 10% cash back at a coffee shop. You feel like you're saving money so you go there more often. Over time, you end up spending far more on expensive coffee because you chose a rewards card. Wouldn't it be better to budget one coffee per week and skip the credit card games?
A debit card does almost everything a credit card does, minus the risk of overspending. A debit card uses money you already have in your bank account. For many people, especially those trying to get out of debt, a debit card is the safer choice. If you can live within a written budget and pay the full balance every month, a credit card can be used as a tool. But the moment you carry a balance, the tool becomes very expensive.
Personal Loans & Loan Sharks
Personal loans are unsecured, meaning no collateral like a house or car. Because of this, banks charge a high APR of ~10–25%. The maximum legal rate is 25%, set by the Bank of Thailand. They are marketed as "fast approval" or "easy cash," but they are one of the most expensive forms of borrowing. We recommend staying away from personal loans.
Have you ever seen business cards left in front of your house that say, "Need money? Call this number"? Those are illegal lenders, and they can be found everywhere. Warning signs of an illegal lender include no formal paperwork, no license to operate, no credit check, and promises like "easy approval" or "no questions asked," with cash delivered very quickly. They charge extremely high interest rates and often require repayment every day or every week.
A legal personal loan from a bank may have a maximum APR of 25%, or ~2% per month. Illegal lenders may charge 10 to 20% per month, which can equal 120 to 240% per year. They often rely on fear, shame, and intimidation to pressure borrowers. If payment is late, some may escalate to harassment or threats. Stay far away from them!
Many people think debt consolidation is the answer. Most of the time, this is nothing more than a bandaid that doesn't fix the heart of the problem; your behavior. It doesn't matter how you reorganize your loans; at the end of the day, you still need to spend less than your income and take responsibility for your own financial decisions. The real solution is changing the behavior that got you into debt in the first place.
National Credit Bureau (NCB)
NCB is a private company licensed by the government that collects credit account information from member lenders and produces a credit report and score. When you apply for credit, lenders access your report to help decide whether or not to give you a loan.
There is no such thing as a "blacklist."[1] This is a common myth. Your credit report simply shows your credit history, and if a lender doesn't like what they see, they deny your application. You can check your credit report for free at the post office or download an app and they'll email it to you.[2]