nnn I borrowed a student loan and will graduate this year. I will have a grace period on the loan for two years after graduation. I have a freelance job that provides mostly steady income every month and I think I will keep it. My pay goes into a savings account without withholding tax, which could cause me difficulty in getting loan approval in the future, as there is no firm evidence of my income. Over the next two years I plan to buy a car or a condo near my workplace, but I'm concerned about how to make the bank believe I can repay debt since I'm a freelancer. Should I start paying off the student loan now to create a good credit profile? Does the bank take payments into account when it comes to housing or car loan approvals, especially for freelancers? Can I start paying off my student loan ahead of the specified date?
—Thitiya
Answered ... by Nattapong Apinantkul
The credit record of the borrower is definitely taken into account for loan approvals. But student loans are excluded from the credit bureau data system so paying off your student loan early should not affect you. Still, if you can repay your debt you should since you borrowed the money.
To repay the student loan, I suggest you negotiate with the state's Office of Student Loans to restructure it for organised monthly payments, which is likely to cut the interest rate. This is because student loans are charged interest on an effective rate basis, so the interest amount declines along with principal.
I'm not sure if the office still has a policy to waive all the interest if borrowers pay back the full amount of debt. You should contact them at 02-612-4888 or www.studentloan.or.th
Over 50% of student loan recipients default, so if more people follow your lead, student loans might actually survive.
On the second point, since you are a freelancer the employer is responsible for deducting part of your income under the Section 50 withholding income tax. It is your employer's fault your work is not documented. For any income earned in Thailand the earner is obligated to pay tax on it, unless it is exempt under a Section 42 category of assessable income.
The disadvantage of being a freelancer is you are in the informal sector, so you do not qualify for health insurance under the Social Security Fund. This fund offers assistance to people when they are sick, unemployed or retired. It is easy to overlook this welfare when we are young and healthy.
Another problem with freelancing is health problems or accidents can prevent you from working, severely limiting your income and requiring you to make a careful financial plan and develop an emergency reserve. The reserve fund may also serve as your retirement savings.
Simply put, being in the informal system decreases your security.
Even though you are freelancer, you can still build up good credit by conducting regular transactions through a bank account. The constant inflows and outflows will be recorded and can be used as a personal credit profile because the bank must keep your credit record.
You should also have a long-term deposit account that requires the depositor to save the same amount for a period of time, as it develops saving discipline and lenders will consider this.
Finally, you should also regularly check your credit at a credit bureau to see your personal financial record and to prevent identity theft. Check it at least once a year.
Credit bureaus have offices on Silom and Asok roads, and the headquarters of the Government Housing Bank is open to the public to check their personal records.
The Thai Financial Planners Association is the Certified Financial Planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted through wealthcare@bangkokpost.co.th or the TFPA webboard, www.tfpa.or.th