Private lenders in Korea resume new loan issuance for first time in 6 months

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Private lenders in South Korea, which had virtually stopped offering loans to consumers since the end of last year, are reopening business, although loan issuance remains at only 30 percent of previous years.

On Wednesday, several stories were shared online about borrowers receiving loans from private lender LEADCORP Inc.

According to multiple sources from the private loan industry, LEADCORP began offering new loans in May and expanded the amount this month.

LEADCORP is the second-largest private lender in Korea. It used to extend tens of billions of won in new loans every month but the volume fell recently to 20 percent of that of a year ago.

Industry insiders note that LEADCORP is offering new loans, albeit in small amounts, as it has been able to receive more debt repayments.

Insiders, however, note that the private loan industry has not yet fully recovered.

According to the Consumer Loan Finance Association, the amount of new loans extended by private lenders is less than half of what it was a year ago.

“The amount is 30 to 40 percent of previous years even if we exclude Apro Financial Co., the operator of Rush & Cash, that is about to withdraw business,” said an official from the association. “Business will remain stagnant until the end of this year until market conditions recover significantly.”

Private lenders in Korea have drastically reduced or suspended new loan issuance since October last year as they faced challenges securing funds amid the sluggish real estate and bond markets.

Apro Financial, which was the industry leader, is set to exit the market later this year. The private lender halted loan issuance last month.