Loan delinquency rates climb among young people as employment numbers fall

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Loan delinquency rates climb among young people as employment numbers fall

Published: 24 Oct. 2025, 18:45

Audio report: written by reporters, read by AI

A student reads job notices on a bulletin board on a campus wall at a university in Seoul on April 12, 2021. [NEWS1]

Financial delinquencies among people in their 20s and 30s are emerging as a growing concern amid a steady rise in overdue loans across Korea’s banking sector.

More young borrowers are defaulting on small personal loans from internet-only banks, as well as on government-backed loans designed to prevent illegal lending.

As of the end of August, the delinquency rate for Korean won-denominated loans at domestic banks — based on loans overdue by one month or more — stood at 0.61 percent, up 0.08 percentage points from the same month last year, according to the Financial Supervisory Service (FSS) on Friday.

That figure, which once fell to 0.24 percent in 2022, has risen for three consecutive years — climbing into the 0.4 percent range in 2023, the 0.5 percent range last year and now the 0.6 percent range.

By age group, younger borrowers show the most pronounced signs of financial stress. As of the first half of this year, data from Korea’s five major commercial banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — showed that people in their 20s held the smallest volume of household loans at 34.57 trillion won ($24 billion), but had the highest delinquency rate at 0.41 percent.

For borrowers in their 30s, the delinquency rate was 0.23 percent — lower than that of those in their 50s, for whom the rate was 0.37 percent, in their 40s, with 0.35 percent, and over 60, with 0.32 percent — but their total debt reached 195.49 trillion won, second only to that of those in their 40s.

A part-time employee is seen at a cafe in Seoul on Oct. 28, 2024. [NEWS1]

The trend is more pronounced at internet banks, which offer quick access to small loans. At KakaoBank, the amount of delinquent debt held by borrowers in their 30s or younger rose from 36.8 billion won at the end of 2022 to 57.7 billion won in July this year — a 57 percent increase.

Their delinquency rate climbed 0.6 percentage points over the same period, from 0.91 percent to 1.51 percent. At Toss Bank, overdue debt among young borrowers rose from 29.8 billion won to 42.5 billion won, with the delinquency rate increasing from 0.93 percent to 1.39 percent.

From January to July this year, Korea’s three internet banks issued a total of 1.19 trillion won in emergency microloans, across more than 430,000 cases.

“Many of the users were young people with little or no income who urgently needed cash,” said a bank official.

The situation is similar for illegal lending prevention loans, which provide up to 1 million won over three years to financially vulnerable individuals — specifically, those in the bottom 20 percent of credit scores or earning less than 35 million won per year.

Job seekers read notices on openings at a job fair held at Coex in Gangnam District, southern Seoul on May 26. [NEWS1]

People in their 20s and 30s accounted for 45.4 percent of the total amount issued under the loan program as of the end of June, according to the Korea Inclusive Finance Agency. The delinquency rate among those in their 20s stood at 40.8 percent and among those in their 30s at 36.5 percent — both above the overall average of 35.4 percent.

The trend appears to reflect deteriorating job prospects amid ongoing economic sluggishness and persistent inflation. The youth employment rate fell to 45.1 percent in September — down 0.7 percentage points from a year earlier, according to the Ministry of Data and Statistics.

Youth employment has now declined for 17 consecutive months, marking the longest stretch since the global financial crisis in 2009.

“The domestic downturn and global headwinds are likely to further weaken corporate investment,” said Park Young-bum, a professor at Hansung University. “We need to look at structural solutions alongside labor and welfare policy.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM SEON-MI [[email protected]]