S Koreans face rate cliff as loans rise

Seoul

A SURGE in South Koreans taking out non-bank, personal loans has prompted warnings that bankruptcies will disrupt an already slowing economy.

"As the income gap grows, more people will encounter an interest rate cliff," said Cho Nam Hee, president of the Financial Consumer Agency, describing the steep jump in borrowing costs to over 20 per cent faced by customers rejected by banks. The amount of debt owed to personal loan providers such as APRO Financial Co's Rush&Cash rose to 13.3 trillion won (S$16 billion) in 2015, a nearly 13-fold increase since the Financial Services Commission (FSC) started compiling data in March 2008.