Non-bank loan woes on riseDelinquent borrowers from non-bank financial companies are growing at a fast clip, data showed yesterday, raising concern that the country’s household debt problem will worsen.
The number of people more than 30 days behind in their repayments accounted for 5.6 percent all credit card loan users in May, up from 4.5 percent in January, according to the data from local credit appraiser NICE Information Service.
The corresponding figures for financing companies and savings banks stood at 8.2 percent and 14.9 percent, respectively. In contrast, the proportion of delinquent borrowers from banks inched up a mere 0.1 percentage point to 2.3 percent in the same period, the data showed.
The fast-growing delinquency rate at non-bank financial institutions comes as banks have capped their household loans since the financial regulator began imposing restrictions on lenders last year in a bid to curb mounting household debts, which have been a major drag on the economy. Korea’s household credit stood at 911.4 trillion won ($793.2 billion) as of end-March.
But market watchers said that stricter requirements to borrow money have sent the low-income group to borrow money from non-bank firms despite the much higher interest rates. They pointed out low-income families are inevitably being hurt by a slowing economy and that eased rules and greater benefits are needed to stop the debt problem from worsening.
Analysts say lower loan rates are needed and repayment periods should be revised as the delinquency of the ‘financially vulnerable’ is getting more serious. Yonhap