The KOSPI has dropped more than 40% from its peak, increasing the repayment burden for borrowers who invested in stocks using loans. The default rates among those under 20 and over 60 are significantly higher than the overall average, raising concerns about the aftermath of speculative investments.
According to data submitted by Lee Jong-wook, a member of the National Assembly's Finance and Economy Committee, the default rate for personal credit lines (overdraft accounts) at the five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—was 0.22% as of the end of June. This marks an increase of 0.04 percentage points from 0.18% at the end of last year.
More concerning is that the rate of increase in defaults is outpacing the growth in overdraft balances. The total overdraft balance at these banks rose from 39.9 trillion won at the end of last year to 43.3 trillion won by the end of June, an 8.5% increase. In contrast, the amount in default surged by 33.2%, from 711 billion won to 947 billion won.
A similar trend is evident in credit loans. The default rate for credit loans at the five major banks was 0.35% at the end of June, up 0.05 percentage points from the end of last year. While the total credit loan balance increased by 3.6%, from 103.4 trillion won to 107.1 trillion won, the amount in default rose sharply by 19.4%, from 3.14 trillion won to 3.75 trillion won.
By age group, signs of financial distress are particularly pronounced among young and elderly borrowers. The default rate for borrowers over 60 was 0.37%, exceeding the overall average by 0.15 percentage points. Those under 20 had a default rate of 0.33%, which is 0.11 percentage points higher than the average.
The pace of increase in default amounts was also steep in these age groups. The overdraft balance for borrowers over 60 grew from 4 trillion won at the end of last year to 4.5 trillion won by the end of June, a 12.5% increase, while the amount in default rose by 23.0%, from 135 billion won to 166 billion won. For those under 20, the balance remained unchanged at 1 trillion won, but the amount in default surged by 32.0%, from 25 billion won to 33 billion won.
In total credit loans, including overdrafts, the default rates for those under 20 and over 60 were 0.67% and 0.59%, respectively, both significantly higher than the overall average of 0.35%.
Analysts suggest that the increase in loan defaults is closely linked to the recent stock market decline. The KOSPI reached an all-time high of 9,385.59 on June 19 but subsequently fell sharply, dropping to 5,262.77 on July 29, a decline of over 40% from its peak.
Borrowers who used loans to invest during the stock market's overheated phase likely faced difficulties in repaying principal and interest due to the drop in stock prices. Given the significant decline in July, the default rates reported at the end of June may not fully reflect the recent shocks.
A banking industry official noted, "Those in their 20s typically have limited income and assets, while many in their 60s are retirees, making them relatively vulnerable in terms of repayment capacity. If they used loans for risky investments, the combination of investment losses and interest burdens could further increase default rates."
* This article has been translated by AI.
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