KUALA LUMPUR, Feb 21 — Dave, 27 says poor judgment and financial mismanagement is part of the reason he is heavily in debt.

The legal adviser -- who only wanted to be known by his first name -- said roughly half his monthly take-home pay goes towards repaying a RM48,000 study loan, a RM70,000 car loan and RM5,000 in credit card debt.

His story is commonplace.

Faced with higher prices for everything from petrol through electricity as the government rolls back its system of subsidies, many Malaysians struggling with debt are not expecting things to get better

Low interest rates and cheap credit has fuelled a spending boom that has helped the economy grow but has also left many Malaysians struggling with large monthly debt repayments.

Data from Bank Negara shows that household borrowing is above 80 per cent of the country’s total economic production or Gross Domestic Product.

It also shows that the number of individual bankruptcies have been rising steadily every year.

In 2013, personal bankruptcies reached 21,984; that’s roughly 60 cases each day.

Even before the government started cutting subsidies, households were already using up a large portion of their incomes to repay loans for things such as houses and weddings, Datuk Paul Selvaraj, the CEO of consumer group Federation of Malaysian Consumers Association (Fomca) told The Malay Mail Online.

“Because incomes are not increasing whereas prices of essentials are increasing, you can expect people to go into greater debt,” he said.

Many households just cannot afford to cut back further on their basic needs. Many will likely sink into greater debt just to fund basic needs such as food, healthcare and education for their children, Selvaraj added.

In a recent report on Malaysian banks, the ratings agency Standard & Poor’s said Malaysia’s households could land in a tight spot because they have borrowed heavily even though their incomes are modest.

People earning RM3000 or less each month have taken on debt that outweighs their incomes, it said.

“These borrowers constitute about 16 per cent of the banking system’s loans and are particularly vulnerable to inflation,” it added.

The official rate of inflation in Malaysia reached 3.2 per cent in December, the highest in over two years.

Some economists predict that inflation could reach 4.0 per cent later this year as the effects of higher fuel and electricity trickle through the economy,

As the inflation rate rises Bank Negara will be under pressure to put up interest rates. That, could in turn push up borrowers’ monthly debt repayments

“Borrowers who have difficulty keeping up with their loan instalment payments are encouraged to approach their credit providers or AKPK to restructure or reschedule their loans so that they can continue to service them,” said Koid Swee Lian, the CEO of the government’s debt counselling agency AKPK.

“Ignoring mounting debts and ‘running’ away from lenders would not solve debt problems but would lead to bankruptcy eventually,” she added.

The number of people applying for AKPK’s free debt management programme rose to 16,769 in 2013 from 16,110 the previous year.

According to AKPK, the top reasons for going into heavy debt are poor financial planning at 22.8 per cent, high medical expenses at 18.1 per cent, failure or slowdown in businesses and credit card debts at 15.3 per cent and 11.1 per cent respectively.

An overwhelming 82.9 per cent who needed the debt agency’s help had a combination of credit card debts, housing and car loans.

Selvaraj at Fomca said people with a “tendency to live beyond their means” will be vulnerable .

What is at stake is more than an individual’s ability to repay loans, but also their “psychological well-being” as they worry about coping with their debts, he added.