Neglected Low-Credit Borrowers... 75,000 Decrease in Loan Shark Users, Increase in Secured Loans

[Image source=Yonhap News]

The number of users of private loan services decreased by 75,000 in the second half of last year, and the proportion of secured loans exceeded 56%.

The outstanding loan balance decreased by 8.6 billion KRW compared to the first half of last year, with a slight decline in private loan balances due to the suspension of new loans by major private lenders.

According to the "2022 Second Half Private Loan Industry Survey Results" announced by the Financial Supervisory Service on the 28th, as of the end of December last year, the number of private loan users was 989,000, a decrease of 75,000 (7%) compared to the end of June last year.

The outstanding loan balance as of the end of last year was 158.678 trillion KRW, down 8.6 billion KRW (0.1%) from six months earlier (158.764 trillion KRW). Secured loans accounted for 89.048 trillion KRW, or 56.1%, while unsecured loans were 69.63 trillion KRW, or 43.9%. The proportion of secured loans in the private loan industry has been on the rise, from 52% at the end of 2021 to 53.8% at the end of June last year.

The Financial Supervisory Service stated, "While the total outstanding loan balance of private lenders showed little change compared to the end of June last year, the number of private loan users decreased and the loan amount per person increased," adding, "There is concern that low-credit individuals with poor credit may be excluded from the private loan market, leading to increased use of illegal private financing."

Due to the expansion of secured loans, the average loan balance per private loan user was recorded at 16.04 million KRW, an increase of 1.12 million KRW from 14.92 million KRW at the end of June last year.

The average loan interest rate was 14.1%, up 0.1 percentage points from the second half of last year. As of the end of last year, the delinquency rate of major private lenders was 7.3%, up 1.3 percentage points from the end of June last year.

Regarding the performance of private debt purchase and collection businesses, the balance of purchased claims was 69.43 trillion KRW as of the end of last year, an increase of 10.5% over six months. The performance of private loan brokerage businesses declined. The number of brokerage cases in the second half of last year was 163,000, down 78,000 from the first half.

The Financial Supervisory Service said, "We will closely monitor the credit supply status and delinquency trends of low-credit groups in the private loan sector to resolve financial difficulties for low-credit users and prevent damage from illegal private financing," adding, "We plan to promote the expansion of credit supply to low-credit groups through strengthening the system for excellent private lenders in the microfinance sector, crack down on and block illegal private financing advertisements, and enhance the promotion of policy microfinance products."

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