People with low income, senior citizens and the self-employed are more reliant on non-banking institutions when taking out loans, exposing themselves to interest rate hikes, an analysis from Korea Institute of Finance showed on Monday.

Data showed that 55 percent of household loans last year borne by the bottom 20 percent income group came from non-banking lenders such as savings banks, cooperatives, insurance companies and private lenders. This is much higher than the 34.2 percent average for all borrowers.

The rate for people in the second to bottom income tier was 41.8 percent, also higher than the average.

Comparatively, lending from non-bankers for the top 20 percent income bracket was 25.2 percent and 28.7 percent for the second-highest income group.

The senior population was also more prone to such loans.  The rate was 43.2 percent for people 65 or older. It was 41.4 percent for people aged 55-64.  The figure was 21.5 percent for those younger than 35, and 27.8 percent for those in the 35-44 age group.

The self-employed and day laborers were more dependent on these loans as well -- 41.4 percent for the former group and 47.3 percent for the latter. For permanent workers, the numbers stood at 25.7 percent.

Loans from non-banking lenders come with higher interest rates.

As of May, the rate at savings banks averaged at 14.6 percent compared to 3.47 percent at deposit banks.  The interest rates at credit unions (4.68 percent) and cooperatives (3.97 percent) were also higher.

KIF also noted that 41.5 percent of the loans by the underprivileged are credit loans, which tend to charge higher rates than collateral loans.

"Taking into account that non-banking sector loans are higher in interest than loans from banks, the burden on the borrowers in case of changes in personal credit level or income can be steep," KIF said in the analysis. "Should income improvement fall short because of slow domestic demand, it will affect the soundness of non-banking loans more than that of banks." (Yonhap)