A sign at a Seoul bank advertising low interest rates for households and individuals. (Yonhap)
SEOUL, May 10 (Korea Bizwire) — More than 15 percent of households in South Korea are unable to balance their budget, a local think tank said.
According to the last year’s study on household finance and welfare conducted by the Korea Institute of Finance, 17.2 percent (3.54 million) of the 20.52 million households in the country spend more than they make.
The current annual income of these households stands at an average of 46 million won (US$36,050), while they hold an average of 45 million won in loans and spend 24 million won on essential goods and services as well as another 9 million won paying interest and other non-consumption charges.
Loans accounted for 98 percent of these households’ current income, indicating that they spend a significant amount of their income paying back what they have borrowed.
Households with a particularly high loan-to-income (LTI) ratio accounted for 61.5 percent of all homes in deficit, holding an average of 400 million won in loans, which was four times higher than other households.
The prevalence of high LTI ratios, indicative of households that are borrowing money to service their debt due to insufficient income, is a problem that should be fixed, the report said.
In addition, 18.6 percent (660,000) of deficit households are highly likely to be covering their losses with security deposits received from tenants, which requires them to look out for sudden drops in lease deposit prices.
Lina Jang (linajang@koreabizwire.com)
