17% of All Households in Deficit... 98% of Income Used to Repay Debt

Households with High LTI Account for 61.5% of Total Deficit Households...Average Debt is '400 Million Won'

Seventeen percent of all households in our country have been identified as 'deficit households.' The photo shows a bank counter in Seoul. Photo by Yonhap News.

[Asia Economy Intern Reporter Kim Se-eun] It has been revealed that 17% of all households in South Korea are 'deficit households.'

On the 8th, Noh Hyung-sik, a research fellow at the Korea Institute of Finance, stated in the report "Characteristics and Improvement Directions of Households with Deficit Financial Status" that "Based on last year's Household Financial Welfare Survey data, 3.54 million households, accounting for 17.2% of the total 20.52 million households, fall under deficit households."

According to the report, the average annual current income (income that is regular and highly reproducible, meaning income that always occurs and is predictable) of deficit households is 46 million KRW, while the principal and interest repayment amount is 45 million KRW, essential consumption expenditure is 24 million KRW, and non-interest non-consumption expenditure is 9 million KRW.

The proportion of principal and interest repayment amount to current income is about 98%, indicating that most of their income is spent solely on 'debt repayment.'

Households with a high Loan-to-Income ratio (LTI) accounted for 61.5% of deficit households. Their average debt reached 400 million KRW, about four times higher than that of other households.

Research fellow Noh pointed out, "If income does not cover expenditures and deficits are covered by debt, there is a problem," and emphasized, "High LTI must be resolved."

The report also included that 660,000 households, or 18.6% of deficit households, are likely to cover their deficits with jeonse or monthly rent deposits received from tenants, and thus they need to prepare for shocks such as a decline in jeonse deposits.

Research fellow Noh said, "The average rental deposit of these 660,000 households is 210 million KRW," adding, "Households that are in deficit but rent out properties may consider the increase in deposits renewed every two years as 'income.'"

Furthermore, he warned, "However, if jeonse prices fall, it may not be smooth to return the deposits to tenants, and vulnerable households may be hit, becoming a link in the transmission of economic shocks," urging caution.

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