Be a Cautious Debtor

Before deciding to borrow or go into debt, one should always ask themselves whether they are ready. There are many cases in which taking out a loan without taking the necessary precautions and preparations results in many problems that follow. For example, not being able to find the required funds to pay off that loan when it is due. Therefore, if taking out a loan results in problems and issues in your cash-flow then the decision to take out a loan should be delayed. Since the basic rules of borrowing state that once you are in debt, that debt must be repaid in full.

It cannot be denied that most if not all creditors prefer debtors who pay off their loans in full and on time. Creditors in turn often repay the favor with various benefits for the debtor. For example, the next time the debtor needs to take out a loan, the creditor may take less time in their considerations and make it more convenient and easy for the loan to be approved or they can provide the debtor with special benefits like a lower interest rate for the loan altogether.

Being a good and prudent debtor can be done by doing the following:

1. Have a system to document and keep a record of all evidence regarding the loan.         

The first thing that you need to do after taking out a loan is to keep careful records of the documents involved in the loan as evidence since it is important information. In the case that changes are made in the agreement, adjustments made to the loan contract, or a lawsuit should occur, the document kept can be used as evidence to protect your interests and prevent either side to have an advantage over the other concerning the loan.  

2. Don’t forget to record and keep track of everything.

A good and prudent debtor knows the amount and the type of each debt they are responsible for. This is possible through the process of recording and noting everything such as credit card debt, car payments, mortgage payments, etc. It is important to categorize the different types of debts into what is considered too good debt and bad debt. After that, note the interest rates for each debt, when the payment for the debt needs to be completed, and how many more installments are left to be paid. v

Consistently recording and noting down everything helps you keep track of how much debt you have left to be paid which provides insights on your financial capabilities. 

3 Always have a backup plan.   

No one is capable of predicting what will happen in the future i.e. a sudden reduction in your salary, losing your job and becoming unemployed, etc. If an unexpected event was to occur, it could result in causing your usual source of income to disappear completely. But the responsibility of paying off the debt that you have created still remains, resulting in, you being unable to make ends meet. 

To prepare and prevent this you should always have a backup plan. Your back up plan can consist of saving money each month into a “For Emergencies Only” account which accumulates to a sum of money that is 3-6 times more than the amount of your regular monthly spending. For example, if your monthly spending is 15,000 baht per month, the money that you have in your “For Emergencies Only” account should be around 45,000 baht – 90,000 baht. If you face the misfortune of suddenly becoming unemployed the debt and payments that you are responsible for can be taken from the “For Emergencies Only” account and reimbursed later.  

4 .If you have questions and concerns make sure you ask the appropriate financial officers involved. 

When using financial services from financial institutions one of the important rights that a debtor has is receiving correct and accurate information. Financial institution officers and employees must be able to provide the necessary information, terms and conditions, and details concerning the financial product, package, or service that they are providing. There must not be any distortion of facts and the information provided must be complete and accurate, so that the customer may have sufficient information to make a decision. Examples of the information provided include: benefits received, risks involving the use of the product, package, or service, costs, service charges, and fines to pay if you do not follow the terms and conditions. One should also be aware of the marketing materials used to generate sales, be wary that they are not too exaggerated resulting in confusion for the customers. Therefore, if a debtor does not understand or has questions regarding the information provided, they should ask immediately. 

If you experience or feel that the officer or employee of the financial institution is conducting themselves inappropriately or if a customer feels like they were taken advantage of or exploited i.e. they are provided with inaccurate and incomplete information, the financial officer or employee was rude, the interest rate was calculated incorrectly, you feel you are being pushed to buy a certain financial product or service, you are able to file a complaint to the customer service department of that financial institution so that the problem can be solved promptly. 

5. Don’t try to escape from your Debt. 

When you feel that you are unable to pay the debt that you have created in time for when it is due do not escape from your debt, you must contact the financial officer or creditor involved right way to figure out a solution. Not only does this show your good intentions and sincerity as a debtor it bolsters the trust that the creditor has in you and more importantly it will not damage your credit rating. 

Being a good and prudent debtor not only removes a lot of the unhappiness associated with taking out a loan, but it also reduces risks, protects you from the dangers that may arise from using the services of financial institutions, and it allows you to receive the proper service from the financial institutions as well.