Delinquency rate of private lender loans rises to 12.6 percent last year

[Photo by MK DB]

Consumer loan delinquency rates at South Korea’s private money lenders surged to over 12 percent last year, influenced by the closure of a major player, according to data released by the Financial Supervisory Service (FSS) on Friday.

As of December 2022, the delinquency rate (defined as loans overdue by 30 days or more) for major private lenders stood at 12.6 percent, up 1.7 percentage points from 10.9 percent at the end of June 2022.

The number of registered private lenders fell to 8,597 by the end of last year, down by 174 from 8,771 in mid-2023. The total loan volume also dropped significantly, primarily due to the license surrender of large lender Apro Financial better known as Rush & Cash and rising delinquency rates. By the end of 2023, the total loan volume was recorded at 12.51 trillion won ($9.01 billion), down by 2.07 trillion won or 14.2 percent compared to the mid-year figures.

The number of individuals using private lenders also declined. By the end of last year, 728,000 people were using these services, down by 120,000 (14.2 percent) from 848,000 at mid-year. In terms of loan types, secured loans constituted the majority at 7.81 trillion won (62.5 percent), while unsecured loans accounted for 4.69 trillion won (37.5 percent).

The average loan amount per person remained relatively stable at 17.19 million won. However, the average loan interest rate increased slightly to 14.0 percent, up by 0.4 percentage points. The FSS said that following the reduction of the legal maximum interest rate to 20 percent, the average interest rate for personal credit loans from major private lenders has continued to decline.