Personal debt rescheduling likely to hit new high this year

SEOUL, Dec. 22 (Yonhap) -- More South Koreans in severe financial duress are likely to apply for a personal debt rescheduling program this year, data showed Sunday, with the number of such cases expected to surpass 100,000 for the first time.

According to the data by the Supreme Court, the number of applications for the program launched in 2004 reached 96,412 at the end of November, outpacing 90,368 of last year, an indication that more South Koreans are suffering from financial distress.

Reflecting their economic troubles, loans from non-banking financial companies that adopt higher lending rates than banks were growing. Such loans accounted for 49.6 percent of the total household loans as of end-September this year, compared to 46 percent in 2010.

"Volatility in household finances expanded (in the first 11 months) due to sharply growing loans from the non-banking sector by low income and lower credit borrowers," said Jung Hee-soo, a researcher at Hana Institute of Finance, a private local economic think tank.

Market watchers also worry that if the Fed tapering leads to the country's interest rate hike, lower income households will be further hit.

South Korea's household credit reached a fresh high of 991.7 trillion won (US$934.7 billion) as of end-September, up 12.1 trillion won from three months earlier, according to data by the Bank of Korea (BOK).

The household debt is widely expected to surpass the 1,000 trillion-won mark for the first time this year.

The BOK data showed that household debt from local banks rose about 5 trillion won in the first nine months, while that from non-banking firms, including insurance companies, soared 26.5 trillion won.

In addition, the loan default rate by households has been on the rise in the non-banking sector since 2010. The credit delinquency rate at saving banks rose to 15.9 percent at end-September from 10.6 percent at the end of 2010.

<All rights reserved by Yonhap News Agency>