Value context and insight. lkm@koreatimes.co.kr
Number of foreign borrowers on the rise
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By Lee Kyung-min
By Lee Kyung-min
Local lenders are seeing an increase in loan applications from foreign borrowers, mostly young people in their 20s and 30s seeking credit loans averaging 60 million won ($54,894), a credit information service provider report said Thursday.
The foreign loan market has grown and is expected to grow further due to the expansion of tailored financial services for foreigners amid local lenders' collective efforts to identify new customer bases, as illustrated by the expansion of services provided in multiple languages.
According to a report by the Korea Credit Information Services (KCIS), the number of foreign borrowers living in Korea was 99,787 and they had a combined balance of 5.97 trillion won in outstanding loans as of June 2020.
The number of borrowers grew 26 percent on average between 2016 and 2019, with the annual growth rate of loan balances averaging 9.6 percent.
This is much higher than the 1.6 percent growth in the number of borrowers and 5.3 percent growth in the loan balance.
The average outstanding loan balance per foreign customer has been on a decline. It stood at 59.9 million won as of June 2020, down from 88.7 million won in 2016. This is lower than 85.5 million won taken out by Koreans.
Foreign customers thus far have mostly sought mortgage loans, but an increasing number of them are seeking unsecured credit-based loans and installment loans.
The number of foreign borrowers using unsecured loans rose to 41.9 percent as of June 2020, up from 33.9 percent in 2016.
Of them, those who took out unsecured loans increased significantly to 22,337 as of June 2020, up from 5,602 in December 2016. They accounted for 22.4 percent of the total, up from 11.6 percent.
The number of foreign borrowers in their 20s and 30s has increased significantly, accounting for a combined 77.1 percent of all credit loans.
The number of credit loan holders in their 20s increased to 7,741 as of June 2020, up from 299 in 2016, whereas the number of 30-somethings jumped to 9,484 from 1,604 in the same period.
Credit loans offered by the top three local lenders combined accounted for over 80 percent of loans taken out by people in their 20s and 30s.
The lender said the foreign loan market will grow further. “Financial services firms should closely monitor the credit history of increasing foreign borrowers to manage risks, a crucial step for the healthy growth of the foreign loan market in Korea,” the report author Kim Hyun-kyung said.
“Also needed is a variety of financial services for foreign customers including remittance services.”