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Household Debt Essay

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Household debt is the amount of money borrowed by households from financial institutions. It includes consumer debt and mortgage loans. It is an obligation emerging from obtaining cash or taking goods or services using a loan (Van der Walt & Prinsloo, 2002). Household debt become an issue when over indebtedness is considered. However, household debt has now become a phenomenon all over the world. Household credit in ASEAN region such as in Malaysia, Thailand, Singapore, Indonesia and Philippine are developing rapidly, spurring concerns that consumers may struggle to pay their bills as interest rates show signs of heading higher.

In Malaysia, the household debt has risen to a new record of 86.8% of Gross Domestic Product (GDP) at the end of 2013 that driven by loans for properties and motor vehicles. It was the highest record of household debt-to-GDP level in Asia. According to the governor of central bank, Tan Sri Dr. Zeti Akhtar Aziz, the level of household debt-to-GDP is expected to keep rising over the next few years due to the high demand for credit especially among young labor force. According to the economists, Dr Muhammad Abdul Khalid, Malaysia has recorded the highest household debt …show more content…

In the annual report of Thailand, household debt in the country has reached up to 80% of GDP in 2014. Thailand household debt accelerated rapidly in year 2010 to 2013. Fitch said Thais have binged on auto financing and unsecured loans, to the extent that nominal household debt doubled between 2008 and 2014, and debt has reached 80% of GDP. Factors that contribute to the increase in household debt in Thailand is due to high cost of living among poorest. Millions of the poorest Thais routinely turn to various forms of off-system money lenders when they cannot access legitimate forms of

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