More than half of long-term debtors in South Korea that have been in arrears since 2014 have not been able to regain footing as of end of June, raising concerns over deepening financial hardship, data showed on Thursday.

According to a Bank of Korea study on 397,000 individuals in Korea that joined long-term debtors in 2014, only 194,000 individuals or 48.7 percent of them have been able to restore credit as of end of June this year. Individuals that manage to regain credit are no longer monitored by Korea Credit Information Services but this does not necessarily mean that their financial status has gone back to pre-debt levels.

Among debtors that restored credit, 133,000 individuals or 68.4 percent of them were able to pay back debt on their own or with others’ support while 39,000 individuals or 20.1 percent received outside support such as from the government’s debt adjustment program. It is unknown how the remaining 22,000 individuals or 11.5 percent of debtors regained credit.

The BOK study also showed that debtors are less likely to be able to restore credit after three years they fail to repay debt. The credit recovery ratio - a figure that shows the number of individuals that have regained credit out of total debtors - was 29.5 percent for those in arrears for less than a year. The figure, however, dropped significantly to 1.1 percent for those with liabilities for more than 3 years.

As of end of June, a total of 1.041 million individuals have not been able to repay debt, accounting for 5.6 percent of total household borrowers, according to data.

The BOK report also showed that the amount of loans held by vulnerable debtors who cannot pay back their debt reached 80.4 trillion won ($70.9 billion) as of end of June. Vulnerable debtors are those that have borrowed loans from three or more financial institutions and have low credit scores of 7 to 10 or are low-income households. Loans held by these vulnerable debtors accounted for 6.1 percent of total household loans. The amount also increased 1.9 trillion won from six months ago.

By Lee Seung-yoon

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