Chip-led recovery leaves many Koreans behind as long-term loan defaulters exceed 180,000
Korea's economic recovery is being driven by strong semiconductor exports, yet the financial challenges faced by vulnerable households remain unresolved. Over 180,000 individuals were newly classified as loan defaulters between January and August of this year, having fallen more than 90 days behind on their payments. With interest rates on the rise, there are concerns that the number of long-term delinquent borrowers could increase further.
New long-term delinquencies have accumulated at nearly the same rate as last year. Annual new registrations have surged from 157,900 in 2021 to 251,500 in 2023, remaining above 260,000 for two consecutive years. Analysts cite repayment difficulties among vulnerable groups due to prolonged low growth and weak domestic demand. However, the economy has shown a clear recovery, with real gross domestic product growing 1.8% quarter-over-quarter in Q1 and 0.6% in Q2 of this year.
This recovery is primarily fueled by booming chip exports. Yet, without sufficient impact across other industries or broader domestic demand, vulnerable borrowers are experiencing growing difficulties in managing their debt repayments. The central bank has noted that the rate of vulnerable self-employed borrowers falling into arrears has risen from 3.17% at the end of last year to 3.60% in Q2.
Over the same period, the share of vulnerable self-employed borrowers already in arrears who remained delinquent the following quarter increased from 81.2% to 82.3%. Rising interest rates have raised concerns about worsening repayment conditions for these vulnerable borrowers. Preventive support to alleviate repayment burdens before delinquency sets in is considered crucial.
The Financial Services Commission has advocated for financial institutions' in-house debt restructuring programs, but participation remains low. As of the end of 2025, only about 160,000 out of roughly 3.19 million eligible loans had been restructured. This is largely due to limited applications - only about 5.92% of eligible loans filed for restructuring.
Financial institutions must take a more active role in supporting vulnerable borrowers to prevent further deterioration of repayment conditions.
Written by urgent.news from The Hankyoreh's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
