As Commercial Banks Raise Loan Standards... More People in Their 30s, 40s, and 50s Turning to Savings Banks

Savings Bank Personal Loans Surpass 1.85 Million, Up 4.6% Year-on-Year

As deposit interest rates rise in the banking sector, the balance of savings and time deposits is increasing. The secondary financial sector is also consecutively raising fixed deposit interest rates. The photo shows Welcome Savings Bank in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

As financial authorities warn against the rapid increase in household loans, the lending threshold at first-tier banks, including commercial banks, has risen, leading to an increase in borrowers turning to second-tier financial institutions. A notable feature is the rising delinquency rates in the second-tier financial sector.

According to data on the "Status of Credit Loans by Age Group at 32 Savings Banks with Assets Over 1 Trillion Won," submitted by the office of Hong Seong-guk, a member of the Democratic Party of Korea, as of the end of June this year, the number of credit loan borrowers at savings banks surpassed 1.848 million.

By age group, compared to June last year, the number of borrowers increased by 20,000 in their 30s (476,000 → 496,000), 53,000 in their 40s (566,000 → 619,000), and 42,000 in their 50s (373,000 → 415,000). Borrowers in their 20s (220,000 → 188,000) and those aged 60 and above (131,000 → 130,000) saw slight decreases.

Delinquency rates surged across all age groups. In particular, as of the end of June this year, the delinquency rate for those in their 20s was 6.9%, a sharp increase of 1.6 percentage points from 5.3% in the same period last year. For those in their 30s, it rose from 4.3% to 5.6%, for those in their 40s from 3.9% to 5.2%, and for those in their 50s from 4.3% to 5.4%. The highest delinquency rate was among those aged 60 and above at 6.8%, up 0.5 percentage points from 6.3% in the previous year.

Representative Hong analyzed, "While borrowers with 'easy money' loans taken out at low interest rates in the past from first-tier banks are suffering from increased interest burdens, in the second-tier financial sector, middle- to low-credit borrowers who cannot cross the threshold of banks are fighting hard, even if it means accepting 'hard money' loans."