Let us explore in depth “bad debt”, an unrecoverable unpaid amount that could become bad debt after a period of time without progress. One of the common questions is whether the loan would be considered doubtful if it was overdue and was accompanied by a negotiated payment. The answer is yes! Once the loan has been overdue for a certain period of time, even if the overdue instalment agreement has been reached, the loan will remain in bad condition as long as it remains outstanding. A change in the status of uncollectible debt would be possible only if all outstanding amounts were liquidated. The elimination of overdue records would require a period of five years。

What difference does it make between overdue loans and bad debts

We cannot confuse overdue loans with bad debts. First, how the two are defined is different. Overdue loans are defined as loans with principal and interest on loans that are in arrears for more than 180 days, while doubtful loans are defined as loans that are no longer repayable by the borrower or that are written off as permitted by the Ministry of Finance. Secondly, the consequences of these two situations are different. Overdue loans may be due to the fact that, more than 180 days later, the financial institution has not yet determined whether the loan will be recovered and the borrower is required to pay the overdue interest and receive a penalty. However, uncollectible loans are loans that are deemed unrecoverable and can be written off through the Ministry of Finance, which could result in impairment losses for financial institutions。