No Last-Minute Surge in Card Loan Demand Before Lending Regulations... Outstanding Balance Slightly Down in June

Outstanding Balances of Refinancing Loans, Cash Advances, and Revolving Payments Also Decline

The outstanding balance of card loans declined slightly last month due to the write-off of non-performing loans at the end of the quarter.

According to the Credit Finance Association on July 21, the outstanding balance of card loans at the end of June for nine card companies (Lotte, BC, Samsung, Shinhan, Woori, Hana, Hyundai, KB Kookmin, and NH Nonghyup Card) stood at 42.5148 trillion won. This represents a decrease of approximately 142.3 billion won compared to the previous month (42.6571 trillion won).

Yonhap News

Contrary to expectations that demand would surge last month ahead of the inclusion of card loans in the third-stage stress-based Debt Service Ratio (DSR) regulations starting in July, the impact appears to have been limited. An official from the card industry explained, "The outstanding balance of card loans declined slightly due to aggressive risk management by card companies and the write-off of non-performing loans at the end of the quarter." The official added, "Since card loans are mainly extended to actual borrowers with low credit ratings, demand did not increase significantly as a result of the DSR regulations."

However, the card industry expects the outstanding balance of card loans to decline significantly this month due to the implementation of stricter household loan management measures and the application of the third-stage stress-based DSR.

Under the 'Household Debt Management Measures' announced last month, the maximum limit for unsecured loans across all financial sectors has been restricted to within 100% of annual income. The financial authorities have also decided to include card loans in this cap on unsecured loan limits.

Meanwhile, the outstanding balances of refinancing loans, revolving payment balances, and cash advances also declined slightly compared to the previous month. The outstanding balance of refinancing loans, which refers to loans taken out from card companies to repay card loans, was 1.4284 trillion won, a slight decrease from the end of May (1.4762 trillion won).

The outstanding balance of cash advances stood at 6.3114 trillion won, down slightly from the previous month (6.4410 trillion won). The outstanding balance of revolving payments also declined slightly to 6.8111 trillion won from 6.8493 trillion won in the previous month.