Middle-aged Koreans hear debt trap snap

By Lee Hyo-sik

More than six out of every 10 Koreans in their 40s and 50s were found to have owed money to banks and other financial services firms as they have had to borrow to purchase homes or pay for rising living costs.

According to a recent survey of 500 Koreans conducted by the Korea Chamber of Commerce and Industry (KCCI), Sunday, 64.1 percent of 40-sometings took out loans from financial institutions. About 62.5 percent of those in their 50s also owed money to lenders.

The corresponding figures for people in their 60s, 30s and 20s were 45.5 percent, 30.2 percent and 10.2 percent, respectively, indicating that the older people are, the more likely they are to borrow money.

``Although our sample size is relatively small compared to other surveys, our poll reflects the prevailing trend that a growing number of Koreans are resorting to borrowing money from banks and other financial firms,” a KCCI spokesman said.

According to the Bank of Korea, the nation’s household debt totaled 922 trillion won in June, up 10.85 trillion won from three months earlier.

The rising indebtedness is largely due to shrinking income, falling home prices and other negative fallout from the ongoing global economic downturn, the spokesman said, adding high oil prices and soaring costs of other daily necessities have made it difficult for many to be financially independent.

About 60.4 percent of those in debt said they took out loans to buy houses, with 16.6 percent borrowing money to invest in stocks, property and other assets. Another 16.6 percent said they needed money to pay for education or living expenses.

The KCCI survey found that 17.1 percent of borrowers had to spend over 30 percent of their monthly income to repay debts.

About 31 percent said they plan to pay back loans over the period of five to 10 years, with 23.9 percent expecting it would take more than 10 years to become debt free.

The survey also found that 93.5 percent of 30-somethings and 83 percent of 20-somethings stash a certain portion of their income away.

In contrast, only 68.2 percent of Koreans in their 50s put part of their income away for a rainy day, with the corresponding figures for 40- and 60-somethings even lower at 67.5 percent and 41.6 percent respectively.

``We think 40-somethings and older are not able to save much because they have to spend a significant portion of income to finance education for children and pay back mortgages,’’ the spokesman said.

More than 67.1 percent of people in their 20s and 38.4 percent of 30-somethings said they save to pay for their wedding, while the majority of those in their 40s and older do so in preparation for retirement.