Get to know Informal Debt

Informal loans are loans that do not go through the financial institution system. Simply said they are not loaned to banks or through financial institutions directly. It’s easy to take out informal loans, but the risks are much greater than we thought, like collecting interest at a higher price than usual.

How many types of informal debt?

Informal loan has both short-term and long-term. For short-term or daily, creditors come to collect money daily. Creditors will include interest payable and principal which are considered high daily expenses once they are divided.

The long-term loan is monthly and annual lending. Monthly interest will be collected until the lump sum is returned. If there is no lump sum to pay the debt, debtors have to pay interest continuously.

How to protect yourself from informal debt

Tricks in lending
Sometimes, loans may be made but not directly to creditors, such as loans based on higher product prices than usual or multiple times loans. In addition, debtors have to pay high prices and also have to pay higher interest.
Not giving details
Sometimes, the details of informal loans or agreements are incomplete. Creditors let debtors lend easily and debtors may not be aware of the fact that they can charge interest rates that are higher the law specified, and conditions may not be met.
Debt payment collection
In recent news, creditors have often come to collect debts by using violence. Even now, we have clear laws on informal debt financing but still have aggressive debt collections that may not be safe for life or property.

What to do if you are in informal debt

Make money to close debt
Starting with reducing unnecessary expenses or earning extra income, including deciding to sell a large item to earn money to pay for debt. It will be difficult, but once the situation improves, buying a new item is possible.
Find a loan in the system
Currently, some banks have loan programs to reduce informal debt problems. Loan applications from financial institutions are considered safer, but they still need some collateral, such as a house or a car.
Find a middleman to mediate
At present, there is an Office for Protection of Rights and Legal Aid for the people, tel: 1157 to seek mediation for informal debt. It will serve as an intermediary for reconciliation between the two sides.

In the end, informal debt is scarier than we thought. Before you decide to be in debt, you should read the details and agreements first, or consult with loan sources in the system for security and to have collateral. If you have already been in informal debt, there is still a way to solve the problem with the government’s assistance.

References from
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