Households' unsecured loans up 5% on-year in 2015: data

Unsecured loans taken out by households grew 5 percent on average in 2015 compared with 2014, mainly due to increased borrowing to pay for business-related outlays, cover living expenses and cope with rental security deposits, government data showed Monday.

Data by Statistics Korea, the Financial Supervisory Service and the Bank of Korea showed that as of late March 2015, the size of credit loans per household stood at 6.42 million won ($5,480), up from 6.12 million won a year earlier.

In the same period, mortgage loans grew 4.9 percent, while credit card loans contracted 3.6 percent on-year. Overall, household debts were up 2.2 percent vis-a-vis the year before.

Unsecured loans cover overdraft bank accounts and money borrowed from private loan companies.

"2015 marked the first time since 2011 that personal loans grew at a faster clip than mortgaged loans," the FSS said.

The increase in debt was fueled by people borrowing more to cover living expenses and support business operations, it added.

Business-related loans accounted for 31.4 percent of the total, followed by 22 percent to deal with living expenses. Authorities added that among young people, there was a spike in money borrowed to pay for home rental security deposits.

Reflecting this, credit loans taken out by people in their 30s, who are most likely to rent homes, surged 60 percent on-year.

The latest findings, however, showed that among all households,

23.3 percent had unsecured loans, down from 24.2 percent in 2014 and 25.2 percent reached in 2013.

Data showed that 57.8 percent of all loans came from banks, with numbers for private loan companies that charge higher interest rates, stood at 23 percent.

Market watchers said that growth in credit loans will require close observation by the government, which in the past focused on controlling mortgage loans. (Yonhap)