Last Year Large Loan Company Delinquency Rate 12.6%... Highest in 10 Years

5.3%p Surge Compared to Last Year
Credit Crisis Concerns for Low-Credit Borrowers Needing Urgent Funds

Last year, the delinquency rate of large loan companies soared to 12.6%, the highest in 10 years. This means that one out of every ten low-credit borrowers using loan services is unable to repay the principal and interest on time due to prolonged high interest rates and economic recession.

According to the "2023 Second Half Loan Industry Survey Results" announced by the Financial Supervisory Service on the 28th, the delinquency rate (principal and interest overdue by 30 days or more) of large loan companies with assets over 10 billion won rose sharply by 5.3 percentage points from 7.3% the previous year to 12.6%. This is the first time in 10 years since 2013 (13.24%) that the delinquency rate of large loan companies has exceeded 12%. The sharp rise in delinquency rates at loan companies, considered the last lending bastion for low-credit citizens, raises concerns about a credit crisis among the low-credit population.

Last year, the loan volume of loan companies was 12.5 trillion won, down 21.3% (3.4 trillion won) from 15.9 trillion won the previous year. Compared to the first half of last year, it decreased by 14.2% (2.775 trillion won). The decrease in loan balances was influenced by the closure of Aflo Financial Loan and the increase in delinquency rates. The loan types consisted of credit loans amounting to 4.697 trillion won (37.5%) and secured loans amounting to 7.8177 trillion won (62.5%).

The average loan interest rate remained at 14%, similar to the previous year's 14.1%. Due to the recent sustained high interest rates and rising funding costs, both credit loan and secured loan interest rates are on the rise. The credit loan interest rate increased from 14.1% in the first half of last year to 14.3% in the second half, while the secured loan interest rate rose from 13.2% to 13.8% during the same period.

The average loan amount per person was 17.19 million won, a 7.1% (1.15 million won) increase compared to 16.04 million won in 2022.

The number of loan users was 728,000, down 26.3% (261,000) from 989,000 the previous year. The closure of Aflo Financial Loan, which had about 90,000 users, is analyzed to have contributed to the decrease in loan users.

A Financial Supervisory Service official stated, "To resolve financial difficulties for the low-credit population and prevent illegal private loan damages targeting vulnerable groups in urgent need of funds, we will revise the maintenance and cancellation requirements for excellent loan companies to encourage continuous credit supply to the low-credit population." The official added, "We will also strengthen guidance and promotion of policy financial products provided by the Korea Inclusive Finance Agency and financial companies to meet the urgent funding needs of vulnerable low-income groups."