Self-Employed Loans Reach Record High, Interest Rates Rise for 4th Month

As of the end of last year, the outstanding balance of loans for self-employed individuals reached a record high of 1,092.9 trillion won. According to data submitted by the Bank of Korea to the office of People Power Party lawmaker Park Sung-hoon, this represents an increase of 0.8% from a year prior. Furthermore, the interest rate on new loans by deposit banks averaged 4.26% annually in February, marking the fourth consecutive month of increases since October last year, thereby escalating the interest repayment burden for the self-employed. The rising trend in loan rates could persist amid growing domestic and external uncertainties, including the Middle East conflict.

A total of 59.3% of self-employed loan borrowers are multi-debtors, owing money to multiple institutions, equivalent to 6 out of 10 individuals. These borrowers are in a vulnerable state, facing a greater impact from increased interest payments when rates rise. The Bank of Korea estimates that a 0.25 percentage point increase in loan interest rates would raise the annual interest burden for all self-employed individuals by 1.8 trillion won, or an average of 550,000 won per person.

In its "Financial Stability Situation" report released on the 26th, the Bank of Korea stated that South Korea's proportion of self-employed individuals exceeds the OECD average, and delinquency rates remain high, particularly among vulnerable borrowers. In response, People Power Party lawmaker Park Sung-hoon emphasized the urgent need to prepare effective 'soft-landing' measures to prevent self-employed debt from escalating into a systemic financial crisis.