"Unable to Manage Debt"... Rapid Increase in Swift Debt Adjustment Amid COVID-19 Impact (Comprehensive)

Rapid Increase in Use of Shinbokwi Quick Debt Adjustment After Q2
Growth Expected to Continue Due to COVID-19 Resurgence and Other Factors

[Asia Economy Reporter Kim Hyo-jin] It has been revealed that cases of people who borrowed money from multiple financial institutions but experienced a decline in repayment ability due to circumstances such as job loss or business closure, and used the Credit Recovery Committee's (CRC) 'Rapid Debt Adjustment' system, have surged since the second quarter of this year.

Due to the impact of the novel coronavirus disease (COVID-19), which began to spread in earnest from February, it is expected that the number will increase further in the second half of the year.

According to the CRC on the 7th, the number of users of the Rapid Debt Adjustment system increased from 1,175 in the first quarter to 1,920 in the second quarter. This is a 63.4% increase compared to the first quarter. In July, 673 people, and in August, 627 people received rapid debt adjustment. With one month left in the third quarter, the number of users has already surpassed that of the first quarter.

Considering the trend over the past two months and the spread of COVID-19, it is expected that the number of users in the third quarter will exceed or at least be similar to that of the second quarter.

The Rapid Debt Adjustment system was introduced in September last year. Borrowers who have taken loans from two or more financial institutions such as banks, credit card companies, or savings banks, and have either been delinquent for less than 30 days or are expected to become delinquent, can apply. However, the borrower must have experienced a decrease in repayment ability due to unavoidable circumstances such as job loss, leave of absence, business closure, or illness, the total debt must be 1.5 billion KRW or less, and the newly incurred debt within the last six months must be 30% or less of the total debt.

If the adjustment target is confirmed with the consent of the creditors holding the majority of the debt amount, the borrower can receive debt reduction, extension of repayment period, or deferment of repayment. Interest on overdue payments is reduced, and the debt can be repaid through equal principal and interest installments over a maximum period of 10 years. If immediate repayment is difficult, a repayment deferral of up to six months can also be granted.

"If long-term debt adjustment is needed, workout and other options should be considered"
Concerns over expanding personal credit crisis amid surging household loans

The Rapid Debt Adjustment system complements the workout system, which can be used when delinquency exceeds 90 days, and the pre-workout system, which can be used when delinquency exceeds 30 days. It aims to manage debt in advance before delinquency information is shared with credit information companies and financial activities are restricted.

Therefore, it is suitable for overcoming temporary crises, and the CRC explains that borrowers who need long-term debt adjustment should consider workout and pre-workout options.

In the financial sector, concerns have been raised that the recent surge in household loans, centered on commercial banks, could act as a trigger for personal credit and debt crises. Last month, personal credit loans at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?increased by a record 4.0705 trillion KRW. During the same period, mortgage loans also increased by 4.1606 trillion KRW.

This content was produced with the assistance of AI translation services.