MZ Generation Enjoying Omakase and Hotel Vacations... Unable to Repay Even 500,000 Won

Internet-Only Banks' Emergency Loan Delinquency Hits 20 Billion Won
70% of Delinquent Amount Borrowed by 2030 Generation
Delinquency Continues to Rise Due to Interest Rate Hikes

It has been revealed that the overdue amount on emergency loans from internet-only banks has reached 20 billion KRW, with 70% of this amount borrowed by people in their 20s and 30s.

According to data received on the 14th from three internet banks?KakaoBank, Toss Bank, and K Bank?by Yoon Young-duk, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, the overdue balance on emergency loans from these three internet banks stood at 20 billion KRW as of last month. Among the overdue balance, 69.9% (13.9 billion KRW) was borrowed by people in their 20s and 30s.

The concerning issue is that overdue amounts are increasing due to recent interest rate hikes.

KakaoBank, which started selling emergency loans in 2020, saw its overdue amount increase nearly sevenfold from 2.5 billion KRW to 17.5 billion KRW in three years. The overdue amounts for Toss Bank and K Bank’s emergency loans were 1.2 billion KRW and 1.3 billion KRW, respectively.

[Image source=Yonhap News]

Considering that the overdue amounts at the end of last year were 9.888 billion KRW for KakaoBank, 547 million KRW for K Bank, and 488 million KRW for Toss Bank, the amounts have nearly doubled in eight months.

By age group, people in their 20s and 30s accounted for more than half of the overdue amounts. Of KakaoBank’s 17.5 billion KRW, 12.3 billion KRW (71%) was from this age group; Toss Bank’s 1.2 billion KRW included 855 million KRW (71%); and K Bank’s 1.3 billion KRW included 782 million KRW (60%).

The total outstanding balance of emergency loans from the three internet banks was 2.6603 trillion KRW. Among these, KakaoBank held the largest share at 86.7% (2.3069 trillion KRW). Toss Bank and K Bank had outstanding balances of 190.8 billion KRW and 162.5 billion KRW, respectively.

Internet banks offer emergency loan products ranging from 500,000 KRW to 3 million KRW. Since these loans are backed by a type of guarantee insurance through Seoul Guarantee Insurance, individuals who can obtain this guarantee certificate are eligible for the loan.

Due to the low borrowing threshold, new credit filers such as people in their 20s and 30s and housewives with limited credit history mainly seek these loans. Additionally, aggressive marketing by internet banks and the ease of access have led to a continuous increase in customers seeking emergency loans.

Emergency loans are issued through simplified document submission and screening processes, resulting in relatively high interest rates. As of the 13th, the interest rates are 4.795% to 15.00% per annum for KakaoBank, 6.24% to 15.00% for Toss Bank, and 6.01% to 15.00% for K Bank. An additional 3% is charged on the loan interest rate in case of delinquency.

Assemblyman Yoon stated, "With easy access to loans, delinquencies among young workers are increasing, which calls for heightened awareness." He also pointed out, "On the other hand, given concerns about high interest rates, high inflation, and economic recession, the government needs to implement precise and selective financial support policies."