[Debt-ridden Twilight] ① Only the Number of Elderly Credit Delinquents Increases... Debts Keep Growing Just to Make Ends Meet

Trends in Credit Delinquents Before and After COVID-19
While Other Age Groups Decreased, Only the Elderly Increased

Entering a Super-Aged Society in 2 Years
Elderly Lack Income and Competitiveness
Debt Repayment Ability Declines

Mr. Lee Sung-jung (64), who lives in Icheon, Gyeonggi Province, became a credit delinquent earlier this year. After retiring from a small and medium-sized enterprise, he opened a seafood stew chain restaurant in 2018. At first, business seemed to be going well, but then COVID-19 hit. There were days when he had only two tables of customers per day. Still determined to persevere, he borrowed operating funds from secondary financial institutions. He incurred debts of 40 million won under his name and 30 million won under his wife's name. Although the COVID-19 pandemic has ended, monthly rent has increased, and many competing stores have appeared nearby. Sales have steadily declined. His health deteriorated, and he even shortened business hours to 5 p.m. to 10 p.m. Mr. Lee said, "I couldn't even cover labor costs, so I closed the store and couldn't repay the debt. Being a credit delinquent at this age makes the future look bleak."

Entering a Super-Aged Society... Increase in Credit Delinquent Elderly

In a world where one in five people is aged 65 or older, South Korea will enter a 'super-aged society' in two years. Gyeongsangnam-do already entered a super-aged society in early September. The problem is that the financial situation of the elderly is rapidly worsening. Although overshadowed by youth issues recently, comparing debt and delinquencies before and after the COVID-19 crisis shows that the elderly's situation has deteriorated much more than that of the youth.

Data on 'financial debt defaulters' received by Rep. Kim Sung-joo of the National Assembly's Political Affairs Committee from NICE Credit Rating Agency reveals this. Compared to the end of 2018, as of June this year, the cumulative number of 'financial debt defaulters'?meaning credit delinquents?increased only among those aged 60 and above across all age groups. During this period, the number rose by 7,711 (from 107,747 to 115,458).

Excluding those aged 60 and above, financial debt defaulters decreased in all other age groups. During the same period, the 40s age group saw the largest decrease of 83,270 (from 231,595 to 148,325). The 30s decreased by 78,447 (from 186,164 to 107,717), the 50s by 54,462 (from 200,195 to 145,733), and the 20s by 12,970 (from 85,277 to 72,307).

Looking at the number of confirmed workout cases compiled by the Credit Recovery Committee, the elderly outnumbered the youth. In the first half of this year alone, those aged 60 and above reached 6,207. Although smaller than the 30s (8,822), 40s (11,182), and 50s (9,911), it was about 1,000 more than the 20s (5,320).

As Household Loans Tighten, Debt Increases Through Business Loans

Because of loan regulations, elderly people aged 60 and above could no longer borrow money from commercial banks and instead took out personal business loans from secondary financial institutions with higher interest rates. According to the Bank of Korea's Financial Stability Report, the average personal business loan amount per person for those aged 60 and above (as of the second quarter) was 38.4 million won. This was higher than the middle-aged group in their 40s and 50s (32.77 million won) and the youth under 30 (8.12 million won).

The report stated, "Since household loan regulations tightened in 2019, non-bank personal business loans have increased among the elderly," adding, "Especially after the phased implementation of borrower-level DSR (debt service ratio) regulations from 2021 to 2022, borrowers with high DSR have greater incentives to raise funds through personal business loans."

It continued, "The elderly have large personal business loan amounts per person and poor self-employed income, leading to rising delinquency rates recently, especially among elderly self-employed individuals," warning, "If economic recovery is delayed, defaults on personal business loans could spill over into household loans."