Moneylenders turn toward young adults in Korea.
Online loan providers have recently begun targeting young adults here in their 20s and 30s in Korea in the name of "providing pocket money." Other peer-to-peer lending platforms promote their services as an investment fund or shared wallet to relax young people's vigilance toward the money lenders.
This comes amid the rapid advance in financial technology, mobile platforms and authentication services, with which online only banks and loan companies are vigorously entering into the online loan market, luring youngsters into debt.
The younger generation is the main target of the online lenders as most of them are familiar with online transactions. More importantly, many of them do not earn enough money to afford the lives they want to live.
In contrast to traditional banks where a borrower faces strict requirements before receiving loans, internet only services offer easy and simple processes for small loans. Users only need to authenticate themselves with their smartphones to receive the funds.
"I had a hard time looking for banks that give loans to university students," said one surnamed Song. "With online only banks however, it was as easy as borrowing money from my friends."
An easier loan service provided for a wider range of recipients may sound ideal, but it has brought about other problems here. Many young students who apply for small loans usually are incapable of repaying them.
A 24-year-old university student, surnamed Jeong, recently decided to suspend his university attendance for a semester to make money to pay for a loan he borrowed from an online money lender.
He saw the digital currency market growing and decided to receive loan services from an online bank to make an aggressive investment in Ripple, one of the major digital currencies.
"I borrowed money from an online only bank as it didn't pay much attention to my qualifications unlike other traditional banks." Jeong said. "I thought I could easily make up for the loan with the digital coins' gain."
Ripple, however, plunged from its peak of 5,000 won ($4.6) to below 1,000 won recently.
"By the time I realized that I stood in debt, I had no choice but to suspend my university course and work as a part timer for a while to pay it back," he said. "Although it was my fault, I wouldn't have invested in the coins if there was nowhere to borrow money from. Neither my friends."
The total amount of arrears among youngsters in their 20s alone in the first half of 2017 reached 46.6 billion won, which is 51.3 percent larger than that in all of 2014, according to a report by Rep. Park Chan-dae of the ruling Democratic Party of Korea.
Additionally, high interest rates are concealed under the cover of the characteristics of small and short term loans. Lenders present their interest rates at a weekly basis for short term loans, which are usually one to two percent.
However, when turned into an annual figure, the interest become usurious as it exceeds 20 percent.
"The lenders have been using expressions such as pocket money to encourage young people to apply for the loans." Kang Hyung-koo, a director general at Korea Finance Consumer Federation, warned against growing number of online loan businesses.
"Given the impression of easy money, youngsters might fail to manage their spending, which will put them in unaffordable debt."
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|Publication:||The Korea Times News (Seoul, Korea)|
|Date:||Feb 14, 2018|
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