Young Adults Turning to Secondary Financial Institutions... Savings Banks' Delinquency Rate Nears 7%, a 'Red Flag'

As the high interest rate situation continues, the delinquency rate of savings banks among the youth is on the rise. In particular, the delinquency rate for credit loans among those aged 20 and under has nearly reached 7%, marking the highest level across all age groups.

According to data obtained by Asia Economy on the 20th through the office of Hong Seong-guk, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea, titled 'Delinquency Rates of Personal Credit Loans by Age Group at 32 Savings Banks with Assets Over 1 Trillion Won,' the delinquency rate for those aged 20 and under was recorded at 6.9% in the second quarter of this year. This represents a sharp increase of 1.6 percentage points compared to the same period last year (5.3%).

Looking at the delinquency rates by age group, those in their 30s also saw an increase to 5.6%, up 1.3 percentage points from 4.3% in the same period last year. The delinquency rates for those in their 40s and 50s exceeded 5%, standing at 5.2% and 5.4% respectively, rising 1.3 percentage points and 1.1 percentage points compared to the previous year. For those aged 60 and above, the credit loan delinquency rate rose by 0.5 percentage points from 6.3% at the end of June last year to 6.8% at the end of June this year.

The outstanding balance of credit loans slightly decreased compared to the previous year but has increased significantly compared to five years ago. In particular, the outstanding credit loan balance for those aged 20 and under was 2.2 trillion won as of the end of June, down 400 billion won from last year, but it doubled compared to 1.1 trillion won at the end of June 2018. The outstanding credit loan balance for those in their 30s was 7.1 trillion won, a 163% increase compared to 2.7 trillion won at the end of June 2018.

The number of credit loan borrowers also showed an increasing trend. The total number of credit loan borrowers was 1,848,000 as of the end of June, up by more than 80,000 from 1,766,000 in June last year. The number of credit loan borrowers increased in all age groups except those in their 20s and those aged 60 and above. For those in their 30s, the number rose from 476,000 to 496,000, an increase of 20,000 in one year, while those in their 40s increased by 53,000 and those in their 50s by 42,000.

In the financial sector, the particularly high delinquency rates for credit loans among those in their 20s and 30s are interpreted as a result of their relatively limited income capacity combined with the recent high interest rate trend, leading to situations where they are unable to repay their loans. The Bank of Korea also pointed out in its Financial Stability Report released in June that "It is necessary to pay attention to the fact that the proportion of household loans taken out by borrowers aged 30 and under since 2020 is higher than in the past," and "Since their income base is vulnerable, it is necessary to keep in mind the possibility that the delinquency rate of household loans taken out since 2020, especially among those aged 30 and under, may rise higher than expected."

Regarding this, Assemblyman Hong said, "The Korean economy, which escaped the COVID-19 crisis by taking on more debt in the private sector than the government, is now facing side effects centered on its weakest links," adding, "In this situation, the ideology of survival of the fittest, where only the government refuses to take losses, is very dangerous. We need to look to the distant future and prepare extraordinary measures."

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