[사설] 4.5 million people in multiple debt, highest ever, preemptive response to ‘block financial crisis’

[사설] 4.5 million people in multiple debt, highest ever, preemptive response to ‘block financial crisis’


[서울=뉴시스] Reporter Kim Geum-bo = Commercial banks are launching home mortgage loan products with a maturity of up to 50 years one after another. The photo is of a bank in Seoul on the afternoon of the 14th. 2023.08.14. [email protected]

The number of ‘multiple borrowers’ who borrowed money from three or more financial institutions has once again reached an all-time high. According to the Bank of Korea’s ‘Household Loan Status for Multiple Borrowers’, as of the third quarter of last year, there were 4.5 million multiple borrowers, and their average loan amount amounted to 126.25 million won. This is the highest ever, an increase of 20,000 from the previous quarter. They account for a whopping 22.7% of all household borrowers (19.83 million). As ‘debt recovery’ reaches its limits, concerns about a financial crisis are growing.

If you look inside, the situation is even more serious. Typically, if the total debt service ratio (DSR) is around 70%, it is considered that there is almost no spending power after paying the loan principal and interest and taxes. Their DSR reaches 58.4%. This means that close to 60% of income is used to repay debt. As a result, the average delinquency rate of multiple borrowers (the ratio of loans that have not repaid the principal and interest for more than one month) was estimated at 1.5% as of the end of the third quarter of last year. It reached its highest level in four years. It is even said that among all multiple debtors, 26.2% (1.18 million people) have a DSR exceeding 70%. 14.2% (640,000 people) exceeded 100%. This means that the principal and interest to be repaid is more than your income.

Among multiple borrowers, ‘vulnerable borrowers’ with low income (lowest 30% income) or low credit (credit score of 664 points or less) account for 6.5% of all household borrowers. There is even a balloon effect in which people with low credit are flocking to secondary financial institutions or loan companies with high interest rates. It is a continuation of a vicious cycle. Our country’s household debt has long exceeded the dangerous level. The International Monetary Fund (IMF) warned of household debt reaching 108% of gross domestic product (GDP). In the latest report by the Institute of International Finance (IIF), among the 34 countries surveyed, Korea was the only one whose household debt-to-GDP ratio (as of the third quarter of last year) exceeded 100%.

It is clear that household debt and delinquency rates will continue to rise for the time being due to the prolonged high interest rates. We must take preemptive action to prevent the household loan ‘detonator’ from turning into a financial crisis. In addition to identifying the good and bad, the government must quickly take special measures to reduce the repayment burden on the financially vulnerable, such as reorganizing debt restructuring programs. The role of the financial sector is also urgent. The public’s opinion of the four major commercial banks, which made a net profit of 12 trillion won last year, is not positive. Rather than a plan reluctantly presented under pressure from the political world, we must help multiple debtors achieve a soft landing through quick and ‘big’ win-win measures, such as adjusting loan interest rates, in order to implement corporate social responsibility.

[ⓒ 세계일보 & Segye.com, 무단전재 및 재배포 금지]

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