BoT adds guidelines for debt consolidation
Move aims to reduce interest burden
The Bank of Thailand (BoT) plans to implement additional guidelines for the debt consolidation program to help retail borrowers reduce interest rate charges.
The BoT has prepared additional debt relief options to help borrowers ease their debt burden amid the latest protracted Covid-19 outbreak.
The central bank is expected to implement the new guidelines on the current retail loan consolidation program in October, said Chayawadee Chai-Anant, senior director of the BoT’s economic and policy department.
The central bank offers debt consolidation as an option as part of its debt restructuring program for retail loans.
Under the current concept of debt consolidation, personal loan borrowers can consolidate all consumer loan debt from many financial institutions into one bank for refinancing and can convert that debt into short-term unsecured loans. term into long-term loans in order to benefit from lower interest rates.
As part of the additional guidelines of the debt consolidation program, the central bank will set cap rates on this pooled debt, Chayawadee added.
For example, the ceiling rate charge for the consolidation of loans between personal loans and mortgage loans must not exceed 10% per year.
Currently, mortgage interest rates are based on the minimum sale rate (MRR) or minimum lending rate (MLR) of home loans of approximately 6-8% per annum, while the interest rate maximum for personal loans is 25% per annum.
Additionally, the central bank will require lenders to waive prepayment charges for debt consolidation.
“Debt consolidation will encourage competition mechanisms in the market and benefit borrowers, especially in terms of reducing interest rates. Therefore, it will further help borrowers to ease the debt burden,” he said. she stated.
The central bank has eased, adjusted and implemented additional debt relief measures for both existing debt restructuring and new loan offerings.
These will help borrowers, especially individuals and small and medium-sized businesses, to alleviate their debt.
Given the protracted outbreak, the central bank has focused on longer-term debt restructuring rather than a short-term debt moratorium.
Borrowers participating in the debt relief measures accounted for 5.12 million accounts, representing total outstanding loans of 3.35 trillion baht.