What is NPL or Non-Performing Loan? 5 Ways to Fight It

Non-performing loans (NPLs) are a major factor that may cause you to miss out on bank approval for a home loan and may cause you trouble in the long run. So if you don’t want to miss out on the opportunity to own your dream home or condo, this article will take you to see what NPLs are, along with 5 ways to escape from non-performing loans, to increase your chances of getting approved for a home loan and having your dream home or condo come true.

What is a Non-Performing Loan (NPL)?
NPL is a term used to mean debt that is not repaid according to the terms and conditions of the contract. This occurs when you apply for a loan and do not repay the debt for more than the specified number of days, usually 90 days. Its full name is Non-Performing Loan (NPL).

Where does NPL come from?
Let’s take a look at the causes of NPL. The causes of NPL may be due to many factors, in addition to the borrower’s income, such as the overall market conditions in the country that affect low-middle-income people and financial discipline that affects the debtor’s ability to pay off debts. To manage until the debt is successfully closed What will happen if you have NPL is that the financial institution you applied for a loan from will report that you have NPL to the data collection center and credit payment history or the National Credit Bureau Co., Ltd., known as the “Credit Bureau”, which will store NPL data received in the processing system for no more than 3 years and will update the data monthly. Therefore, even if you have already paid off the NPL or bad debt, you will have to wait for the data to be updated again.

What is an NPL or Non-performing Loan? Is it a credit bureau?

The term credit bureau does not mean NPL, which is bad debt, as many people think. A credit bureau is a term for a credit information center that stores your debt repayment history, whether it is good or bad debt repayment history, which is valued as a credit score (Credit Scoring) at what level.

The credit score will be an indicator of the probability of debt repayment. Using statistical methods to process data by credit information companies There are 8 levels, ranked from the least likely to default at AA to the most likely to default at HH.

Credit Score Level

Therefore, if you have a good debt repayment history, the information will appear on the credit bureau for the financial institution you are applying for a loan to consider. At the same time, if you do not repay the debt within the 90-day deadline, that lump sum will become NPL, which is bad debt and will be stuck in the credit bureau history.

If the customer does not consent to disclose this information, the financial institution will not be able to forward the information to the national credit bureau. The disadvantage is that it will cause you to not have a credit bureau in this part and may cause the financial institution that is applying for a loan to incorrectly assess your ability to repay the debt and think that you may have an NPL.

How does NPL affect bank lending?

Known as bad debt, having NPL is not good because NPL is a debt that will have a long-term effect on future loan applications, similar to a history that makes financial institutions uncertain about your ability to repay debt. If there is an emergency and you need to apply for a loan next time, there is a very high chance that it will not be approved.

The reason for this is that financial institutions must also assess the risk of lending because it affects the cost of setting aside provisions according to the criteria of the Bank of Thailand, which states that each place must have provisions set aside in the case of NPLs. Financial institutions will still have money to pay to general customers.

Therefore, the best target group that financial institutions want to lend to without worrying about NPL problems is the group of customers with good behavior, who can repay debts on time, and have no NPL. They may be approved more and may get a lower interest rate than the group that may have a history of NPL.

5 steps to survive from NPL

1. Before applying for a loan, survey your income and expenses to create a debt repayment plan to prevent NPL. Surveying your income and expenses will help you see more ways to repay your debts. You will know how much more income you need to earn or where you need to reduce your expenses, which will reduce the chances of NPL.
2. Once you have successfully applied for a loan, you must repay your debts on time and in full to prevent NPL.
   This step is the best basic foundation. If you can maintain discipline in repaying your debts to prevent NPL, you will maintain a good history, which will increase your chances of loan approval.
3. If you have an NPL history, you should urgently contact the financial institution that you are applying for a loan from to request debt restructuring.
   If you know that you will not be able to repay your debts on time and may become NPL, one thing that will help is to contact the financial institution that owns the loan directly to negotiate with the creditor to extend the repayment period or temporarily reduce the interest rate, depending on the creditor’s agreement. If you restructure your debt before it is overdue for more than 90 days, you will not have an NPL and ruin your history.
4. If you are allowed to fix your NPL, strictly follow the NPL repayment terms and conditions, and create a new, good history.
   When you have applied for NPL debt restructuring and have received new debt repayment terms, You should strictly comply with the conditions by paying the debt on time for at least 12 months to show that you are determined and have the financial status to be ready to take responsibility for the new debt.
5. Clear NPL.
   Although resolving NPLs may take a long time, the advantage of closing this debt is that in addition to helping you get rid of the outstanding debt, it also improves your history, showing that you are truly capable and disciplined in paying off your debts.

Having NPL means having bad debt. Although it may seem like a big deal that affects the approval of loans to buy your dream home or condo, it does not always mean that there is no way to solve the problem. Just check your income and expenses, and plan your debt repayment carefully so that you do not have NPL by paying your debts in full and on time. Or if you predict that you will have a problem with not being able to pay your debts in time, there is still a solution by contacting the financial institution that owns the debt as soon as possible before it becomes bad debt.