Amid a prolonged economic contraction and shrinking employment rate, South Koreans in their 20s have increasingly become debt-ridden, depending on bank overdrafts and credit card loans, data showed.
The outstanding balance of bank overdrafts and card loans extended to 20-somethings totaled 2.14 trillion won ($1.91 billion) as of end-June, up sharply from 1.97 trillion won and 2.07 trillion in 2018 and 2019, respectively, said Rep. Jeon Jae-su of the ruling Democratic Party, quoting data from market watchdog the Financial Supervisory Service.
The number of overdraft loan applications from local 20-somethings stood at 177,000, with applicants’ debts exceeding 11 million won on average, according to Jeon.
Young debtors were found to have rushed to second-tier lenders, whose application processes are less strict than those of first-tier banks. While the combined balance of bank overdrafts at local savings banks decreased by 6.5 percent in the given period, only people in their 20s saw their outstanding loans soar by 20.2 percent on-year, he said.
To cope with mounting debts, more people in their 20s resorted to debt restructuring through the Credit Counseling and Recovery Service, a nonprofit organization that helps debtors get back on their feet. Nearly 12,500 people in their 20s applied for debt workouts last year -- up 30 percent from 2015, when the figure stood at 9,519, he added.
The lawmaker attributed the heavy debt levels to the worsening economic slump and subsequent job crisis. The unemployment rate for those aged between 15 and 29 reached 8.9 percent last month, up 1.6 percentage points from the previous year, data showed.
“Young adults usually go into debt to cover school expenses through bank overdrafts and credit card loans. Comprehensive measures to ease their financial burden are urgently needed,” the lawmaker said.
By Choi Jae-hee (firstname.lastname@example.org