As Household Lending Tightens, Car-Backed Loans With Rates Up to 19% Surge
Translated from Korean and summarized by DistantNews. Read the original for the full story.
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- Car-backed lending has increased rapidly as South Korea strengthens controls on household borrowing.
- Savings banks and finance companies issued nearly 5 trillion won in car-backed loans from January through July, exceeding 70% of the previous year’s total.
- The loans are commonly used by financially strained borrowers and can carry interest rates as high as 19%, raising concerns about delinquency and worsening loan quality.
Car-backed loans are surging in South Korea as tighter household-lending rules push financially strained borrowers toward a more expensive source of credit.
Savings banks and finance companies issued nearly 5 trillion won in automobile-collateralized loans during the first seven months of this year. That figure already exceeds 70% of the amount issued throughout last year.
The loans are regarded as a typical form of recession-related borrowing because borrowers with limited access to funds often turn to their vehicles as collateral. But the cost can be steep, with annual interest rates reaching 19%.
The rapid growth is raising concern that high borrowing costs could lead to more delinquency and weaken the soundness of lenders’ loan portfolios.
About this summary
Originally published by Chosun Ilbo in Korean. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.
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