August 29, 2023 11:19
Many 20-something Koreans who have only just entered the workforce are already mired in debt after borrowing money to buy stocks or cryptocurrency in the boom.
Stocks soared and the crypto frenzy reached its height in the coronavirus pandemic, creating a free-for-all amid zero interest rates, but that era came to a screeching halt when the pandemic ended and central banks around the world began hiking interest rates.
Lenders were throwing money even at young people with low credit ratings. One 27-year-old from the provinces came to the capital in 2017 to go to university despite opposition from his parents. After quitting his part-time job in a coffee shop, he needed money and borrowed W4 million from a savings bank at 10 percent interest (US$1=W1,323).
"I thought it was amazing how easy it was to borrow a few months' worth of living expenses," he said. "I was totally ignorant about finance and borrowed money from several different lenders."
His debt swelled to W28.5 million, which became harder and harder to pay off.
The number of 20-somethings whose debts were written off through workout programs by the Credit Counseling and Recovery Service in the first six months of this year soared to the highest level in five years. Beneficiaries do not have to pay accrued interest and only redeem 70 percent of their debt. A total of 4,654 people in their 20s turned to it in the first half, up 30 percent from a year ago, while in all other age groups the figure dropped.
Others fall behind on their interest payments. According to People Power Party lawmaker Kim Hee-gon, 24.5 percent of 20-somethings who borrowed money to cover living expenses were behind on interest payments, the highest rate among all age groups and almost twice as high as the overall delinquency rate of 14.1 percent.
Dim job prospects are making matters worse. According to Statistics Korea, the number of jobs available to 20-somethings declined in the first quarter of this year for the second straight quarter, and 1.26 million young graduates are out of work.
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