What is bad debt?
Bad debt is a common term in the credit field, referring to loans that the borrower cannot repay on time according to the agreement signed with the bank or financial institution. Bad debt can include loans that the borrower has not paid on time for a long period of time (usually 30 days or more), leading to the inability to recover the borrowed amount, causing damage to the bank and affecting the financial reputation of the customer.
When an account is considered bad debt , the borrower's credit history will be severely affected, reducing the ability to borrow money in the future and in many cases, the borrower will face expense accounts arising from the work not being paid on time such as interest and service fees.
Bad debt Not only is it a problem for banks, it also directly affects the financial lives of individuals and businesses. Managing bad debt and maintaining a good credit history is an important factor in ensuring financial stability and access to future loans.
More clarity on bad debt
According to the regulations of the State Bank of Vietnam, bad debts are loans that customers do not pay on time, causing difficulties for banks in debt collection. These loans are usually separated into different groups, depending on the severity of the debt situation.
Specifically, bad debt divided into groups group 3 debt (doubtful debt), group 4 debt (bad debt) and group 5 debt (bad debt). This debt group reflects the severity of the debt situation and affects the bank's decision to lend to customers in the future.

Learn about bad debt to avoid ambiguities
How is there no bad influence?
When a loan account is converted into bad debt , this will not only affect the bank but also cause negative impacts on individual customer and business Bad debt can have serious consequences for your personal finances or your business operations. Here are some of the main effects of bad debt:
1. Impact on credit and borrowing ability
One of the most serious consequences of bad debt To be signal loss . Credit score is an important factor that banks and credit institutions use to evaluate customers' ability to repay debts. The lower the credit score, the more difficult it is to borrow money in the future.
- Individual : When you have bad debt, your credit score will be negatively affected. This means that it will be difficult for you to borrow money from banks or other financial institutions in the future. If banks do lend, the interest rate will be higher than for customers with good credit scores.
- Business : For business, bad debt will also affect the ability to raise capital from banks. Enterprises with bad debts will not be able to borrow capital with favorable conditions as before, and in some cases, banks may refuse to grant credit altogether.
2. Increased financial costs
When your loan is converted into in debt , you will be faced with interest rate and debt collection costs . Banks often charge additional penalties or higher interest rates when loans are not paid on time. This increases the cost of borrowing and can result in you paying more than the original loan amount.
- Individual : Bad debts can cause a heavy financial burden, as you end up paying more than the penalty or additional fees. This can cause you to delay financial goals or major projects like buying a house, car or investing in personal projects.
- Business : Businesses with bad debts also have to bear higher costs to handle unpaid loans. These costs will reduce profits and affect the company's ability to expand its business.
3. Impact on business operations
For business , bad debt can lead to interruption in business operations . Loans that are not paid on time will cause businesses to no longer have enough financial resources to maintain and develop production and business activities. This can cause a lack of cash flow, inability to pay fixed expenses and cause serious problems in business operations.
- Small and Medium Enterprises (SME) : Small businesses often do not have enough financial resources to back them up, so when they run into bad debt, it can be very difficult to stay afloat or pay their bills.
4. Difficulty in asset sale and liquidation
When the loan account becomes bad debt and the borrower is no longer able to pay, the bank or financial institution can take debt collection measures, including the creation of collateral. This does not cause discomfort to the individual or business but still affects their financial reputation in the eyes of partners and banks.
- Individual : If bad credit is the result of not being able to pay your mortgage, you may lose assets such as your home or car. This will have long-term negative effects on your personal finances.
- Business : Businesses may also be forced to liquidate assets to pay off debts, resulting in the loss of important assets serving the manufacturer or business. This reduces the business's competitive energy in the market.

Difficulties in asset sale and liquidation
How to prevent and manage bad debt
Understanding about bad debt and its effects will help individuals and businesses have reasonable financial strategies to avoid falling into bad debt. Here are some strategies to prevent and effectively manage bad debt:
1. Maintain strong financial capacity
- Individual : You need to maintain a clear plan, keep track of your income and expenses, and save a reserve account. Maintaining a reserve will help you easily solve urgent problems without affecting your ability to repay the debt.
- Business : Businesses need to make sure they do not borrow beyond their financial capacity. They need to build a solid financial strategy and maintain a steady cash flow so that they can pay off their debts on time.
2. Track your usage regularly
- Individual : Check your credit report regularly for signs of bad debt. When you discover overdue debt or loans that are not paid on time, you need to have a timely solution and at the same time be reasonable with the bank or credit institution about extending or reducing interest rates.
- Business : Businesses should also monitor their signal status, especially when there are large loans or when participating in major accounts of transactions. This helps businesses avoid incurring bad debt without knowing it.
3. Use financial management tools like Livetrade Pro
Use Livetrade Pro , a powerful tool for tracking and analyzing credit, you can easily manage your loans and major financial transactions. This tool helps you make accurate financial decisions and respond promptly, avoiding bad debt situations.

How to manage the bad debt effect
What is bad debt? and how bad is the influence ? Bad debt not only harms the bank but also seriously affects personal and business finances. When you have bad debt, your ability to borrow money in the future will be affected, borrowing costs will increase and you will have difficulty maintaining business operations.
Maintaining a good credit history, keeping track of loan accounts, and using effective financial management tools like Livetrade Pro will help you avoid major financial risks and optimize your borrowing strategy. Download Livetrade Pro now to optimize your main financial strategy and manage your personal finances smarter. Start today to manage your finances and protect your future assets.