Consumer Credit in South Korea

PROSPECTS

Card lending increases with various products offered by credit card companies

Credit card companies are actively developing various types of loan products to seek other revenues in case the South Korean government keeps pressuring them to lower the fees they charge to merchants. Instalment payment plans, lease contracts and cash advance services are becoming easier for consumers to access, and this trend is expected to accelerate over the forecast period, although the South Korean government will keep an eye on card lending to maintain a stable loan market.

Government regulation aims to reduce household debt by controlling mortgage allowances

Government consumer lending regulations are getting stricter as the level of household debt reaches serious levels. The price of property in Seoul is increasing very rapidly, so the government has legislated that consumers can only have a limited mortgage loan when they buy property within certain areas if they already have other properties.

Government entities offer support to reduce burden for students

Education loans and the ensuing debt burdens have been a big social issue in South Korea, as many college students are having a hard time paying them back, whilst the unemployment rate is getting higher. The Korea Student Aid Foundation (KOSAF), which is a government entity with the authority to grant education loans, has retained the lower interest rate, which is 2.

COMPETITIVE LANDSCAPE

Commercial financial institutions are major lenders, but highly affected by government

Although there are many commercial bank lenders in South Korea, consumer lending is highly affected by government policies towards the domestic economy. The top commercial banks such as Shinhan Bank and KB Kookmin Bank are the major bank-based lenders, whilst Samsung Card Co and Hyundai Card Co are the major non-bank-based commercial card lenders.

More players entering auto loans

Auto loan lending used to be dominated by auto capital companies such as Hyundai Capital and Hana Capital. Although they are still the major players, other financial institutions are actively developing auto loan products as well, as auto lending is relatively less affected by government regulation than mortgages/housing lending, for example.

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