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Delinquency rate rises among people in their 20s
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By Lee Kyung-min
By Lee Kyung-min
The number of customers aged between 20 and 29 failing to pay off credit loans soared in June, fueling concerns that unemployed young people with low credit and little collateral to offer will emerge as the highest-risk borrowers amid the virus-triggered economic crisis.
More people in desperate need of cash are opting for high-rate credit loans over collateral-backed low-rate loans, an indication of overall waning financial conditions.
Data from the Korea Credit Bureau analyzed by the Narasallim Institute, a private research organization, showed the amount overdue among borrowers in their 20s stood at 104,000 won ($87) in June, up 0.75 percent from a month earlier. The increase is notable given all other age groups saw the amount decrease from the month before.
Of more concern is the amount taken out by 20-somethings soared to 6.71 million won in June, reporting a 2.7 percent month-on-month jump, a figure far higher compared to 0.5 percent taken out by all other age groups in the same period.
Loans sought by the 20-somethings have been on a steep rise since the beginning of the year.
According to the top five commercial lenders ― KB Kookmin, Shinhan, Woori, Hana and NongHyup ― the amount taken out by those in their 20s spiked to 6.9 trillion won in May, up more than 16 percent from January when the figure was 5.9 trillion won.
This is much higher given those in their 40s saw the figure jump 11.4 percent, followed by 30-somethings (10.2 percent) and 50-somethings (3.17 percent).
Young people seeking bigger loans compared to earlier this year have emerged as a major risk to lenders as many have no jobs, much less collateral to back their credit.
“The amount borrowed by young people who recently began working at a company with a limited maximum loan amount certainly adds to our concern about financial soundness, a major risk in case their repeated delinquency leads to a full-blown default,” an official from one of the five lenders said.
An overall increase in the credit loans in and of itself is a major red flag, an indication that the quality of debt is deteriorating rapidly amid the pandemic.
The household debt ratio measured by household debt divided by disposable household income stood at 163.1 percent in the first quarter of 2020, the highest the agency has detected in the 13 years it has been compiling the data.
“Debt growing faster than income will lead to more households being pushed over the edge, a risk that not only concerns the social safety net but also financial stability,” Seoul National University economist Kim So-young said.