Personal Real Estate-Backed P2P Loans Near 1 Trillion Won

Over One-Quarter of the Entire Loan Market

[Asia Economy Reporter Kim Min-young] It has been revealed that the amount of money individuals have borrowed through real estate-secured loans from peer-to-peer (P2P) financial companies is approaching 1 trillion won. Along with the increase in loan amounts, delinquency rates have also risen, raising concerns about the deterioration of the P2P market.

According to the Korea P2P Finance Association on the 16th, as of the end of last month, the amount of personal real estate-secured P2P loans was recorded at 961.6 billion won. This represents a 14.6-fold increase compared to 65.5 billion won in March 2017, when the association first disclosed personal real estate-secured P2P loan amounts. The pace of loan growth is very steep. After recording 180.3 billion won in December 2017, it jumped to 384.8 billion won in December 2018 and 862.4 billion won at the end of last year. In January, the cumulative amount surpassed 900 billion won for the first time, reaching 909.1 billion won. This means that loans increased by about 100 billion won in the past two months.

When including real estate loans received by corporations through P2P companies, the total amount of real estate-secured P2P loans reached 1.6069 trillion won as of the end of last month. This accounts for more than one-quarter of all P2P loans.

Some argue that this is a balloon effect of the government's December 16 real estate measures. In December last year, the government announced strict loan regulations, including a complete ban on mortgage loans for purchasing apartments priced over 1.5 billion won in speculative areas and speculative overheating districts. At that time, there were concerns that P2P loans might become a loophole to circumvent mortgage loan regulations.

However, industry insiders unanimously stated, "Most real estate P2P loans are refinancing loans used to repay existing loans or to switch from loans from loan companies or savings banks to P2P." They added, "P2P is not being used as a loophole to bypass mortgage loan regulations." They also noted, "Real estate loans are secured by high-quality collateral such as apartments and houses, so even if defaults occur, part of the principal can be recovered through sales or auctions."

Nevertheless, anxiety about P2P loans continues to grow. Even top-tier companies considered reliable are experiencing soaring delinquency rates, leading to a decline in trust across the industry. Terra Funding, the industry leader with a cumulative loan amount of 1.0609 trillion won, had a delinquency rate of 18.98% at the end of last month, up 1.5 percentage points from 17.48% in January. Another top-tier company, Honest Fund, also saw its delinquency rate rise from 6.23% to 6.53% during the same period. Meanwhile, P2P lending is a business model where unspecified multiple investors lend money to borrowers through an online platform and receive a certain interest. It includes unsecured credit loans to salaried workers or self-employed individuals, secured loans backed by real estate or movable property, and real estate project financing (PF) loans that fund the construction of small buildings or villas.

As of the end of last month, the cumulative loan amount of 45 association member companies was 6.2408 trillion won, with an average delinquency rate of 8.23%. Compared to January, the cumulative loan amount (6.1243 trillion won) increased by 116.5 billion won, and the delinquency rate (9.32%) decreased by 1.09 percentage points.