Increase in the Proportion of Household and Individual Business Loan Delinquents... "Policy Support and Utilization Activation Needed"

Last Year, 49% of Salaried Workers and 60% of Self-Employed with Household Loan Delinquencies Remain Delinquent This Year
"Once Delinquency Occurs, High Probability of Long-Term and Repeated Delinquencies"

Concerns have been raised that the proportion of borrowers who take out household loans and personal business loans but fail to repay them on time is continuously increasing. Since delinquencies generally tend to persist once they occur, it is analyzed that support measures targeting vulnerable groups need to be activated until this trend is reversed.

On the 24th, the Korea Institute of Finance announced in its report titled "Recent Household Loan and Personal Business Loan Scale and Delinquency Status" that as of the end of June this year, the proportion of borrowers with household loans overdue by 30 days or more was 2.0%, up 0.3 percentage points (P) from the same period last year.

The proportion of borrowers holding personal business loans who were overdue by 30 days or more also increased by 0.8 percentage points compared to the same period last year, reaching 2.3% as of the end of June this year.

Research Fellow Kim Hyun-yeol predicted, "Since delinquencies generally have the characteristic of being persistent and repetitive once they occur, it will take a considerable amount of time for the financial situation of delinquent borrowers to improve."

In fact, as of the end of June last year, 48.6% of salaried workers and 60.2% of self-employed individuals who were delinquent on household loans were still in delinquency as of the end of June this year. Additionally, among salaried workers who had been delinquent at least once on household loans from January 2022 to June this year, 29.2% experienced delinquency two or more times during that period. Although delinquent borrowers are a minority, this means that once they experience delinquency, they are highly likely to suffer from long-term and repeated delinquencies.

Therefore, it was advised that in order to fundamentally improve the debt and income conditions of vulnerable borrowers next year, continuous policy support linking the financial, employment, and welfare sectors is necessary, along with active promotion to encourage utilization. Since next year’s budget includes support policies for business closure, re-startup, and job seeking targeting self-employed and small business owners, it is necessary to activate the use of such support measures for vulnerable groups to reduce the delinquency entry rate.

Research Fellow Kim explained, "The implementation of the stress total debt service ratio (DSR) regulation will continue to stabilize household debt," but added, "Since the debt repayment ability of vulnerable borrowers remains low and their situations are difficult to improve in the short term, policy support for them needs to continue next year as well."

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