Foreigners Borrowing Money in Korea Increased by 26% Over 5 Years...

Korea Credit Information Services Announces 'Trends in the Domestic Loan Market for Foreign Residents'
Annual Average Growth Rate of Foreign Borrowers is 26.0%

[Asia Economy Reporter Park Sun-mi] The number and scale of foreigners borrowing money in Korea have surged.

According to the "Trends in the Domestic Resident Foreigner Loan Market" report by the Korea Credit Information Services on the 16th, as of the end of June this year, the number of foreign borrowers stood at 99,787, with loan performance reaching 5.977 trillion KRW. Since 2016, the annual average growth rate of foreign borrowers was 26.0%, and the loan balance growth rate was 9.6%, which is significantly higher compared to the domestic borrowers’ annual average growth rate of 1.6% and loan balance growth rate of 5.3% during the same period.

A notable feature is the expansion in the number of foreign borrowers centered on small loans compared to the past. The average loan balance per foreigner has continuously decreased since 2016, when it was 88.72 million KRW, reaching 59.90 million KRW as of the end of June this year, which is lower than that of domestic borrowers (85.59 million KRW).

Foreign loans are mainly collateral loans, but their proportion has been decreasing recently. As of the end of June, the proportion of foreign collateral loans was 85.6%, higher than the domestic rate of 74.5%, but compared to the end of 2016, the collateral loan proportion decreased by 1.9 percentage points. The proportion of borrowers also declined from 40.7% to 36.6%.

On the other hand, the number of unsecured loan borrowers and the scale of installment finance loans have expanded. As of the end of June, the number of foreigners holding unsecured loans was 41,810, with the proportion rising from 33.9% at the end of 2016 to 41.9%. Among them, the proportion of foreigners holding credit loans increased from 11.6% in 2016 to 22.4%.

Rapid Increase in Credit Loans Among Foreign Youths in Their 20s and 30s
Accounting for 77.1% of All Credit Loans

Foreign credit loans have recently expanded mainly among young foreigners in their 20s and 30s. Foreign borrowers in their 20s and 30s account for 77.1% of all credit loans. This was influenced by a significant increase in foreigner-specialized credit loans offered by some financial companies. Financial companies are showing strong interest in the foreign loan market by expanding foreigner-exclusive financial services to secure new customers.

The Credit Information Services expects that the domestic resident foreign loan market is rapidly expanding and that the number of foreign customers with financial transaction needs will continue to increase due to the growing foreign population in Korea.

Kim Hyun-kyung, a researcher at the Credit Information Services, advised, "For financial companies to continuously embrace and expand foreign customers, they must provide financial services suitable for foreign financial demands, and sound risk management through foreigner-specialized credit evaluation models is essential for those with limited financial history." She also added, "Efforts should be made to activate financial services for foreigners by expanding various foreigner-specialized financial services, not only simple financial services such as remittance but also loans, insurance subscriptions, and investment advisory services."

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