Banks Tempt Koreans with High-Interest Payday Loans

Both online-only and conventional banks have started offering so-called payday loans exclusively via their mobile apps. 

These small loans, usually ranging from W3 million to W5 million, are meant to tide individuals over when they need quick funds but have a poor credit rating or no collateral (US$1=W1,331).

Despite interest rates reaching up to 15 percent, the convenience is often tempting to people in their 20s. 

Korea's household debt is soaring, and the ease of obtaining loans without the need for a solid financial record can lead to youthful bankruptcy and other devastating consequences.

According to a survey by the Financial Supervisory Service and the Bank of Korea last year, the average financial literacy score of Koreans is 66.5. But people in their 20s scored below average, suggesting they often have trouble working out how much the interest will amount to in money terms.

The results have led to calls for better financial education so young people do not fall prey so easily to payday loans and other debt traps.