Interest Rate Hike Could Hurt Millions of Debtors
02 October, 2018
Some 2.43 million people who have taken out high-interest loans from small savings banks or credit card companies could be wiped out if interest rates rise, a study suggests.
According to Bank of Korea data revealed Monday, 2.43 million people were considered high-risk borrowers at the end of 2017 or repeatedly late on their monthly repayments, accounting for 13 percent of recipients of household loans.
High-risk borrowers are those who took out high-interest loans from small savings banks or from at least two credit card companies as well as people who have borrowed more than W200 million from multiple financial institutions (US$1=W1,112).
They also include people in the bottom 30 percent of the income bracket who borrowed money or people with poor credit ratings and those who have been late on their monthly repayments for more than five days.
The BOK has kept the base interest rate frozen since last November, but the U.S. Federal Reserve has now hiked interest rates, putting pressure on Korea to follow suit or watch foreign investors cash out of local financial markets in search of higher returns overseas.
"An interest rate hike will impact these vulnerable borrowers even more in a tough job market," said Liberty Korea Party lawmaker Choo Kyung-ho. "The BOK should think twice before raising interest rates."