Overdue Loans Rise As Economy SlowsBanks report that delinquency rates for consumer loans are mounting due to the economic slowdown and depressed personal incomes.
Kookmin Bank said Monday that its total overdue loans rose to 675.5 billion won ($541.7 million) as of the end of last month, about 4 percent of its consumer loan total, up sharply from December's count of 408.8 billion won. Hanvit Bank said its delinquent loans total rose in January to 185.9 billion won, or 2.67 percent of its total consumer loans, up from 151 billion won just the month before.
Total household loans in the banking sector had slipped, from 247 trillion won to 226 trillion won, following the onset of the economic crisis about three years ago because of higher interest rates and reduced personal incomes. But the figure had rebounded to 286 billion won by last September, bringing higher household interest expenses. Households' average ratio of interest burden to disposable income has more than doubled since 1990, from 6.1 percent to 12.7 percent.
Increased consumption and the boom periods in the stock market over the past two years have brought correlative rises in demand for consumer loans, a Bank of Korea analyst said, and banks and credit card companies have also shifted more of their marketing efforts toward household loans. "If the slow economy persists," he warned, "the total amount of delinquent loans will continue to increase."
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