What is bad debt and how to fix it?
Last updated: 3 Aug 2025
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No one wants to be in debt, but sometimes, when money is tight, they have to take on more. Applying for a loan or cash advance via credit card is a solution to improve liquidity. However, be aware that overspending can lead to unexpected debt. There are many types of debt, including bad debt and good debt. Regardless of the type of debt, it's important to consider the necessity and avoid letting your debt create hardship later on. Let's learn about each type of debt to effectively manage your debt burden.
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What is bad debt?
Non-performing loan (NPL) is debt that is overdue for more than 90 days or that has not been repaid according to the agreed-upon terms. Bad debt can arise from a number of causes, including borrowing money from a bank or financial institution and failing to repay within the specified timeframe. Using a credit card without considering your ability to pay, meaning "inability to pay," can lead to lawsuits, asset seizures, negative credit ratings, and bank blacklisting. This can lead to loan applications being rejected or even more difficult to obtain in future applications.
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What is good debt?
While NPLs are non-performing debt, the opposite is true. Good debt refers to debt that generates future income, whether from loans for business operations, real estate investment, rental, or resale.
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What are the penalties for NPLs?
Being in debt isn't wrong, but if you have debt or are about to enter debt, you should know how to manage it properly. However, if you default on your debts and fail to make payments on time, it can cause stress and pressure as you struggle to find a way to deal with the problem. What are the penalties for NPLs? What are the solutions to avoiding NPLs?
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1. NPLs impact spending.
Having NPLs significantly impacts your daily expenses, whether it's essential expenses like food, housing, or travel, or even repaying existing debts. Without proper management, it can lead to financial discipline.
The solution is to set a budget for your monthly expenses. Ideally, debt should not exceed 40% of your monthly income. Excessive debt can lead to insufficient funds for daily expenses. It's also important to manage your monthly budget consistently.
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2. Bad Debt Damages Credit
If you're in debt, most financial institutions will report your debt repayment history to the National Credit Bureau. If you have a bad history of late payments or defaults, this will affect your credit approval process. If you're overdue for more than 90 days, your credit will be blacklisted, requiring a three-year wait before your account returns to normal.
The solution is to stop accumulating debt and avoid unnecessary expenses to repay your debts. This includes setting aside a portion of your savings. If you're struggling to repay your debts and avoid being blacklisted, the best thing to do is negotiate with your financial institution for a debt reduction, concession, or restructuring. Once you've reached an agreement, make sure you repay your debts on time.
___________________________________________
3. Bad Debt Damages Your Life Opportunities
Having bad debt has numerous repercussions if it's not managed properly. It can also lead to missed opportunities in life, such as spending money to travel abroad or investing in real estate to grow your income, which you can't afford due to ongoing debt.
The solution is to prioritize your debt repayments, focusing on the debt with the smallest remaining balance. To reduce your existing debt, or choose to pay off the debt with the highest interest rate to save money for other debts, make some lifestyle changes, and reduce frivolous expenses to use the money to pay off debt.
___________________________________________
Thank you for the great information from Krungthai Bank. ขอบคุณข้อมูลดีๆ จาก REIC
___________________________________________
What is bad debt?
Non-performing loan (NPL) is debt that is overdue for more than 90 days or that has not been repaid according to the agreed-upon terms. Bad debt can arise from a number of causes, including borrowing money from a bank or financial institution and failing to repay within the specified timeframe. Using a credit card without considering your ability to pay, meaning "inability to pay," can lead to lawsuits, asset seizures, negative credit ratings, and bank blacklisting. This can lead to loan applications being rejected or even more difficult to obtain in future applications.
___________________________________________
What is good debt?
While NPLs are non-performing debt, the opposite is true. Good debt refers to debt that generates future income, whether from loans for business operations, real estate investment, rental, or resale.
___________________________________________
What are the penalties for NPLs?
Being in debt isn't wrong, but if you have debt or are about to enter debt, you should know how to manage it properly. However, if you default on your debts and fail to make payments on time, it can cause stress and pressure as you struggle to find a way to deal with the problem. What are the penalties for NPLs? What are the solutions to avoiding NPLs?
___________________________________________
1. NPLs impact spending.
Having NPLs significantly impacts your daily expenses, whether it's essential expenses like food, housing, or travel, or even repaying existing debts. Without proper management, it can lead to financial discipline.
The solution is to set a budget for your monthly expenses. Ideally, debt should not exceed 40% of your monthly income. Excessive debt can lead to insufficient funds for daily expenses. It's also important to manage your monthly budget consistently.
___________________________________________
2. Bad Debt Damages Credit
If you're in debt, most financial institutions will report your debt repayment history to the National Credit Bureau. If you have a bad history of late payments or defaults, this will affect your credit approval process. If you're overdue for more than 90 days, your credit will be blacklisted, requiring a three-year wait before your account returns to normal.
The solution is to stop accumulating debt and avoid unnecessary expenses to repay your debts. This includes setting aside a portion of your savings. If you're struggling to repay your debts and avoid being blacklisted, the best thing to do is negotiate with your financial institution for a debt reduction, concession, or restructuring. Once you've reached an agreement, make sure you repay your debts on time.
___________________________________________
3. Bad Debt Damages Your Life Opportunities
Having bad debt has numerous repercussions if it's not managed properly. It can also lead to missed opportunities in life, such as spending money to travel abroad or investing in real estate to grow your income, which you can't afford due to ongoing debt.
The solution is to prioritize your debt repayments, focusing on the debt with the smallest remaining balance. To reduce your existing debt, or choose to pay off the debt with the highest interest rate to save money for other debts, make some lifestyle changes, and reduce frivolous expenses to use the money to pay off debt.
___________________________________________
Thank you for the great information from Krungthai Bank. ขอบคุณข้อมูลดีๆ จาก REIC
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