Number of Private Lenders Increased, but Users Decreased by 11.8% and Loan Balances Fell by 3.4%

Number of Users Decreases by 186,000 in Just 6 Months

[Asia Economy Reporter Park Sun-mi] As the number of domestic loan sharks reached 8,501 at the end of last year, an increase of 46 from the first half of the year, it was revealed that the loan balance and the number of users decreased due to some loan sharks halting new loans.

According to the "2020 Second Half Loan Shark Industry Survey Results" announced by the Financial Supervisory Service on the 25th, the number of registered loan sharks (including loan brokerage businesses) was 8,501 at the end of last year, an increase of 46 compared to the end of June last year.

Although the number of loan sharks increased, both the loan balance and the number of users shrank.

The loan balance stood at 14.5363 trillion KRW at the end of last year, down 506.8 billion KRW (-3.4%) from 15.0431 trillion KRW at the end of June last year. While the loan balance of small and medium-sized loan sharks (assets under 10 billion KRW and individuals) increased by 187.5 billion KRW (6.4%) to 3.12 trillion KRW, the loan balance of large loan sharks (assets over 10 billion KRW) decreased significantly by 694.3 billion KRW (-5.7%) to 11.4163 trillion KRW. Of the total loan balance of 14.5363 trillion KRW at the end of last year, unsecured loans accounted for 7.3677 trillion KRW and secured loans for 7.1686 trillion KRW.

The number of loan shark users was 1.389 million, a decrease of 186,000 (-11.8%) from 1.575 million at the end of June last year, due to business reductions by loan sharks acquired by Sanwa, Joy, and savings banks. The continuous decline in loan balance and the number of loan shark users is attributed to the suspension of new loans by Japanese loan sharks, the closure of P2P-linked loan sharks, and business reductions by loan sharks acquired by savings banks. However, the loan balance per user has been steadily increasing, reaching 10.47 million KRW, up from 7.84 million KRW at the end of 2018 and 8.96 million KRW at the end of 2019.

Meanwhile, the interest burden on loan shark users is improving as the average loan interest rate continues to decline due to the reduction of the legal maximum interest rate. The average loan interest rate at the end of last year was 16.3%, down 0.7 percentage points from 17.0% at the end of June, influenced by the reduction of the legal maximum interest rate. From July 7, the legal maximum interest rate is scheduled to be further reduced (from 24% to 20%), increasing the likelihood of further contraction in the loan shark market.

A financial authority official stated, "We will closely monitor the impact of the maximum interest rate reduction and the business reduction or suspension of large loan sharks on credit supply to low-credit borrowers," adding, "We will support the early establishment of the Financial Consumer Protection Act and strengthen guidance and inspections against rights violations of loan shark users such as illegal debt collection, and through the selection of excellent loan shark companies in the microfinance sector and expansion of related support systems, we will also strengthen the credit supply foundation for low-credit borrowers."

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