[Multiple Debt Time Bomb] 270,000 Self-Employed with 'Muneobal Loans', Twice as Many as Before COVID-19

Multiple Debts at 3 or More Places Totaling 157 Trillion
Average 576.55 Million KRW Per Person
'Debt Bomb' Time Bomb Amid Interest Rate Hikes

[Asia Economy Reporter Kwangho Lee] It has been revealed that the loan amount of self-employed individuals who borrowed money from three or more financial institutions has reached 157 trillion won. The average loan amount per person is as high as 600 million won. The number of multiple debtors has more than doubled compared to before COVID-19. This means that the number of self-employed people facing financial difficulties has increased to the extent that they borrow money not only from banks but also from high-interest second and third-tier financial institutions. With the full-scale interest rate hike underway, there are concerns that they will act as a trigger for a 'debt bomb.'

According to data submitted by NICE Information Service to Yoon Chang-hyun, a member of the National Assembly's Political Affairs Committee from the People Power Party, as of November last year, the number of multiple debtors among the self-employed who had loans from three or more places was 272,308. This accounts for 9.8% of all borrowers (2,769,609), meaning one in ten is a multiple debtor. The number of business owners borrowing money from various sources has increased 2.1 times in two years compared to the end of 2019 (128,799).

The outstanding loan balance of multiple debtors was 157 trillion won, accounting for 24.8% of all self-employed loans. The average amount borrowed per person was 576.55 million won.

In the case of multiple debts among the self-employed, the problem is that they borrowed money even from the relatively high-interest second and third-tier financial sectors, and their income is irregular, making the risk of default higher than that of regular salaried workers. Especially during the full-scale interest rate hike period, the risk is likely to spread to other financial institutions. According to a report published by NICE Information Service in May last year, the potential default rate of self-employed multiple debtors with unsecured loans was 15.9%, three times that of wage workers (5.7%).

By age group, multiple debtors among the self-employed were 90,857 in their 40s and 87,657 in their 50s, accounting for two-thirds of the total. This is interpreted as middle-aged and older people entering retirement age actively starting businesses but being hit hard by COVID-19. This was followed by those in their 30s (44,938) and those aged 60 and over (42,504).

By loan amount, 73,188 people were in the 30 million won range, and 49,805 people were in the 40 million won range.