Household Debt and Delinquency Over the Life Cycle

This paper uses loan-level data from Thailand’s National Credit Bureau to study household debt over the life cycle of borrowers. We decompose two aggregate and commonly used measures of debt — debt per capita and delinquency rate — into components that unveil the extensive and intensive margins of household indebtedness. We find a striking inverted-U life-cycle pattern of indebtedness as predicted by economic theories. However, peaks are reached at different ages for different loan products and different lenders. We also find that debt has expanded over time for all age groups. Younger cohorts seem to originate debt earlier in their lives than older generations. Meanwhile, older borrowers remain indebted well past their retirement age. Finally, we find a downward pattern of delinquency over the life cycle. Our findings have important policy implications on financial access and distress of households as well as on economic development and financial stability of the economy.