"Savings Banks and Regional Banks Have Lent Money Everywhere" ... Surge in Multiple Debtors in Their 20s

[Borrowing 20s, Faded Youth]

Multiple Debtors in Their 20s Increased by 21% During COVID-19
Overwhelming Compared to Other Age Groups

Without Income, Leading to Credit Delinquency

[Asia Economy Reporters Sim Nayoung and Song Seungseop] "In my mid-20s, I fell into stock addiction and struggled, but with my parents' help, I applied for a personal workout. I paid it off diligently and then got a job. However, succumbing to the temptation of coins and stocks was my fatal mistake. Since early last year, I have fallen back into the swamp of loans."

29-year-old Seo Jimin (pseudonym) borrowed a total of 76.89 million won from six financial institutions, including commercial banks, savings banks, and regional banks, claiming to invest. She borrowed money at interest rates ranging from 6.3% to 16.4% per annum depending on the bank. Seo’s monthly salary is 2.8 million won, but her monthly principal and interest repayment amounts to 2.77 million won, so now she is considering a pre-workout. Seo expressed anxiety, saying, "As the COVID-19 situation drags on, the company is also unstable, and I am in a crisis not knowing when I might be laid off."

The Debt Backlash of 'Yeongkkeul' and 'Bittu' Has Begun

According to the ‘Number of Multi-Debtors by Generation (people who borrowed money from three or more financial institutions)’ submitted on the 29th by the Financial Supervisory Service and the Bank of Korea to Yoon Changhyun, a member of the National Assembly from the People Power Party, the number of multi-debtors in their 20s increased by 21.0% (302,582 → 366,369) from the end of 2019 to the end of 2021. The increase and growth rate are overwhelming compared to other age groups. The 30s increased by 1.0% (999,291 → 989,142), and the 40s decreased by -0.2% (1,389,407 → 1,385,908).

Photo by Asia Economy DB

Considering that people in their 20s have low income before fully starting their social lives, the possibility that multi-debtors in their 20s will become credit delinquents is higher than in other age groups. The deterioration of economic capacity in the 20s is pointed out as a serious factor threatening the country's sustainability, and countermeasures are needed. Yoon, a standing member of the Presidential Transition Committee’s Planning Division, said, "The debt backlash against the 20s who jumped into 'Yeongkkeul' (all-in borrowing) and 'Bittu' (debt investment) has begun," adding, "Risk management measures such as youth-tailored debt restructuring plans should be proactively prepared in anticipation of the interest rate hike period."

At the beginning of the COVID-19 crisis, stock prices plummeted, and people in their 20s borrowed money to rush into the stock and coin markets. As central banks worldwide pumped money into the market, it overheated further. The bubble did not last long. Since the second half of last year, it has deflated, and people in their 20s have become desperate. With interest rates rising sharply, their debt burden is increasing even more.

20s Reaching Out to Secondary Financial Institutions

There is also a perspective cautioning against the formula ‘Youth Debt = Risk Asset Investment.’ This is due to concerns that the worsening debt situation of financially struggling 20s could lead to their marginalization. Baek Jongho, a research fellow at Hana Financial Management Research Institute, explained, "Since the COVID-19 crisis, unpaid leave, layoffs, and reduced work opportunities have worsened employment conditions for young people, causing their income to plummet and significantly increasing the number of multi-debtors in their 20s," adding, "Vulnerable youth are reaching out not only to banks but also to secondary financial institutions and loan sharks."

One analysis suggests that one reason young people in their 20s take on debt is to cover jeonse or monthly rent deposits. Kim Donghwan, a senior researcher at the Korea Institute of Finance, said, "Low-income youth often use credit loans extensively to prepare for jeonse or monthly rent deposits."

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