Impact of Interest Rate Hike... Credit Debt Management Consulting Increases by 159%

[Asia Economy Reporter Eunju Lee] The number of borrowers using the credit debt management consulting service provided by the Korea Inclusive Finance Agency increased by 159% compared to the same period last year. This is attributed to the growing number of borrowers struggling with credit and debt management due to ongoing interest rate hikes and the pressures of making a living.

According to the Korea Inclusive Finance Agency on the 7th, the number of users of the 'Credit Debt Management Consulting' service in the first half of this year was recorded at 20,529. This represents a 159.5% increase from 7,912 users in the same period last year. Credit Debt Management Consulting is one of the non-financial services offered by the Korea Inclusive Finance Agency since 2020, providing credit management consulting to borrowers facing difficulties with credit and debt management.

The consulting targets borrowers using policy inclusive finance products such as 햇살론 (a low-interest loan product exclusively for low-credit, low-income citizens), 미소금융 (a microloan program supporting financially marginalized groups who have difficulty accessing formal financial institutions with unsecured and non-guaranteed self-support funds), as well as low-income, low-credit borrowers (those with credit scores in the bottom 20% and annual income below 35 million KRW). Borrowers burdened by high-interest loans such as card loans and private loans can receive guidance on improving their credit scores and information on low-interest policy loan products through this consulting.

The sharp increase in consulting users over the past year is attributed to the ongoing impact of rising interest rates. As market loan interest rates rise steeply, the interest burden on low-income citizens has increased. The demand for consulting likely surged as borrowers with multiple debts or excessive credit card usage relative to their limits faced growing interest burdens. However, a Korea Inclusive Finance Agency official noted that the expansion of eligibility criteria for applying for the consulting service had a significant effect. The official explained, "Until last year, borrowers had to wait six months after using policy inclusive finance products to apply for consulting, but from this year, we have expanded the program to allow immediate application upon using policy inclusive finance products."