Young People Struggling with Debt: A Growing Concern

Increasing Number of Young People with Credit Problems

The number of people in their 20s with credit problems is rapidly increasing. According to data from the Financial Supervisory Service, as of the end of July, there were 65,887 people in their 20s registered as people with credit problems with the Korea Credit Information Services. This is an increase of 13,307 (25.3%) from the end of 2021 (52,580).

Causes of Credit Problems Among Young People

People in their 20s who were registered as credit risk due to failure to repay loans received from banks accounted for about half (33,610 people), followed by savings banks (22,356 people) and specialized credit companies (16,083 people). Another characteristic is the large proportion of small-scale delinquent borrowers who have not been able to repay loans worth hundreds of thousands to millions of won.

Consequences of Credit Problems

If a credit risk holder exceeds a specified period of delinquency (e.g. 3 months after loan maturity or 6 months after delinquency), he or she will be registered with a credit information agency and will face financial disadvantages such as suspension of credit card use, restrictions on loan use, and a drop in credit rating.

Impact of Economic Slowdown on Young People

The debt burden is increasing among young people as they are having difficulty finding proper jobs due to the economic slowdown caused by high interest rates and high prices. The number of employed young people aged 15 to 29 has been decreasing year-on-year for nearly two years since November 2022.

Need for Macro Policies

Last July, the number of young people who did not work or look for a job but just “rested” was 443,000, the largest number ever for July. There is a need for macro policies such as job and social policies to address the issue of credit problems among young people.

Support for Young People with Credit Problems

The Korea Small Business Finance Agency has announced that it will implement a re-loan system for those who have repaid their small living expenses loans in full starting on the 12th. The maximum support limit is 1 million won, and additional loans are available when interest is paid for more than 6 months after the initial 500,000 won loan.