20s Trapped in Debt Cycle... Over 2.5 Trillion Won in Credit Line Debt

Outstanding Overdraft Loan Balance for People in Their 20s Reaches 2.5787 Trillion Won as of End of June

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] The outstanding balance of bankbook and card loans (card loans) among people in their 20s has exceeded 2.5 trillion won. As loans increase, applications for debt adjustment are also rising.

According to data received by Jeon Jae-su, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, from the Financial Supervisory Service on the 21st, the outstanding loan balance of minus products used by people in their 20s in the financial sector was recorded at 2.5787 trillion won as of the end of June.

The outstanding loan balance for people in their 20s has steadily increased from 1.8681 trillion won at the end of 2017, 1.8529 trillion won at the end of 2018, 1.9565 trillion won at the end of 2019, to 2.4758 trillion won at the end of 2020.

Although bank overdraft accounts accounted for the majority, the sharp increase was in card loans. The outstanding balance of overdraft loans at commercial banks was 2.5 trillion won, an increase of 100 billion won (4.2%) compared to the end of last year. During the same period, savings banks increased by 1.4 billion won (2.1%) to 67.5 billion won, and the outstanding balance of minus card loans at credit finance companies also rose by 1.5 billion won (15.5%) to 11.2 billion won. Although the interest rates are high, the use of card loans, which are easier to obtain than bank loans, is rapidly increasing.

Meanwhile, as loans increase, applications for debt adjustment are also rising. The number of people in their 20s who applied for debt adjustment to the Credit Counseling and Recovery Service was 10,202 at the end of 2017, 10,471 at the end of 2018, 10,187 at the end of 2019, and 12,780 at the end of 2020, an increase of 25.3% over three years. As of the end of June this year, the number of applicants was recorded at 6,109.

Assemblyman Jeon Jae-su pointed out, "Young adults who lack financial experience are falling into the trap of debt," and added, "It is urgent to check the repayment capacity of young borrowers, especially in the secondary financial sector, and to prepare countermeasures."