Rise in Credit Defaulters Among Young People in Their 20s

The number of people in their 20s who are unable to repay their financial loans on time and have become credit defaulters is rapidly increasing.

There are concerns that young people’s financial difficulties are worsening as delinquencies are occurring mostly in small loans of less than 10 million won.

Statistics on Credit Risk Factors

According to the ‘Data on Credit Risk Factors by Industry for the Past 3 Years’ received by the office of Democratic Party of Korea member Lee Kang-il from the Financial Supervisory Service, as of the end of July, there were 65,887 people in their 20s registered as credit risk factors with the Korea Credit Information Services.

This is a 25.3% increase compared to the end of 2021 (52,580 people). During the same period, the total number of credit borrowers increased by about 8%, from 548,730 to 592,567.

Consequences of Credit Risk

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 various disadvantages in his or her financial life, such as suspension of credit card use, restrictions on loan use, and a drop in credit rating.

Even before stepping foot into society, they are labeled with a ‘debt stigma’, which further deepens their economic difficulties.

Breakdown of Credit Risk Takers

The number of people who were registered as credit risk takers due to failure to repay loans received from banks was 33,610, accounting for about half of the total, followed by savings banks (22,356 people) and specialized financial companies for credit (16,833 people).

Small Delinquent Borrowers

In the case of youth debt, the proportion of small delinquent borrowers who were unable to repay loans worth hundreds of thousands to millions of won was high.

As of the end of July, the number of people in their 20s with short-term delinquency information registered with credit rating agencies (CB) was 73,379 (excluding delinquent card payments), and among them, 88.1% (64,624 people) had a delinquent amount of ’10 million won or less’.

Criticisms and Solutions

Given the small amount of money, it seems likely that many young people will be experiencing difficulties with living expenses, housing costs, etc.

There are criticisms that the burden of debt is increasing among young people as they are having difficulty finding decent jobs due to the economic slowdown caused by high interest rates and high prices.

Rep. Lee Kang-il said, “As low growth continues and new jobs for people in their 20s are decreasing, the difficulties young people face in making a living are being revealed as a result of small-amount delinquency.” He added, “We should not stop at resolving small-amount delinquency among young people through financial means such as debt adjustments, but implement macro-level youth policies such as jobs and social policies.”