Consumer Credit in South Korea

PROSPECTS

Growth of household debt in South Korea slowing, although total amount reaches record high

Due to the government regulation on mortgages and economic slowdown, the growth rate of household debt in South Korea is slowing. As the major portion of household debt is from mortgages, the government regulation to reduce the LTV (loan to value ratio) as well as DTI (debt to income ratio) affects the consumer lending industry.

Auto loan industry becomes more competitive

As other loans including mortgages are highly regulated by the government, the auto loan industry is becoming the next opportunity for many financial companies. Auto loans used to be the main product for auto capital companies such as Hyundai Capital, which operates under Hyundai Motors group, one of the largest automotive companies in South Korea; however other financial entities such as retail banks and insurance companies are also aggressively entering the market.

COMPETITIVE LANDSCAPE

Commercial finance entities are major lenders

The top commercial banks such as Shinhan Bank, KB Kookmin Bank and Woori Bank are the major bank-based lenders, while Samsung Card Co Ltd and Hyundai Card Co Ltd are the major non-bank-based commercial lenders. And other financial institutions such as insurance companies are also expanding their presence in the market.

Government policies affect consumer lending landscape greatly

Although there are many commercial bank-based lenders in South Korea, consumer lending is highly affected by government policies towards the domestic economy. Therefore, regulations on mortgage loans and other economic situation will affect private lending players.

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