As the government raises the threshold for credit loans to manage household loans, the number of low-income loans (small credit loans) of less than 3 million won, which are excluded from the calculation of the total debt repayment ratio (DSR) by borrowers, is on the rise. Analysts say that the number of ordinary people who want to borrow emergency funds such as living expenses has increased in the economic downturn, and the demand for "debt investment" due to the booming stock market has also increased.

According to the financial sector on the 17th, the total amount of microcredit loans from 79 savings banks reached a record 1.44 trillion won in the first quarter of this year. Compared to the balance (1.21 trillion won) in the same period last year, about 230 billion won (19%) has increased in just a year. Compared to the first quarter of 2022 (907.5 billion won), 539.1 billion won (59%) increased in four years.

Small credit loans, which can be received without collateral due to the small amount, are mainly used for emergency funds for ordinary people, such as living expenses, hospital expenses, and card payments. Despite the fact that the average interest rate is about 15%, which is far higher than that of commercial banks' credit loans, borrowers who have been pushed out of the primary financial sector often knock on the door because they need urgent money.

While microcredit loans of less than 3 million won have increased, savings banks' total loans are on the decline. Overall loans fell to about 94 trillion won in the first quarter of this year from about 96 trillion won in the first quarter of last year. While savings banks' credit books are generally shrinking, only rapid loans have grown rapidly. The increase in microcredit loans is also due to household loan regulations. Loans of less than 3 million won are excluded from the calculation of DSR for each borrower. As a result, borrowers with full DSR limits by receiving mortgage loans or credit loans from the first financial sector seek microcredit loans when they need additional cash flow. An official from the financial sector said, "Borrowers who have exhausted much of the existing loan limit seek microcredit loans to raise living expenses or short-term liquidity."

Recently, debt investment demand to raise short-term investment funds seems to have partially flowed in due to the strong stock market. Analysts say that there was a balloon effect on this as banks locked the door, such as reducing the credit loan limit.

[Reporter Cha Changhee]