Record-high leverage concentrated in fewer hands raises risks for domestic demand and complicates policymakers’ efforts to curb financial instability without triggering a sharper slowdown.
South Korea’s households are carrying a heavier debt burden than ever, with the average loan balance per borrower surpassing 97 million won (about $72,000), according to newly released data. The milestone underscores a precarious rise in financial leverage even as the total pool of borrowers shrinks, concentrating risk and amplifying vulnerabilities in Asia’s fourth-largest economy.
The figures reveal a deepening contradiction: while the number of people holding loans has fallen to its lowest since late 2020, standing at 19.68 million in the third quarter, the debt pile itself continues to swell. Aggregate household borrowing has grown for six consecutive quarters, breaching 1,900 trillion won in mid-2024 and reaching 1,913 trillion won ($1.4 trillion) by September.
“Household debt is increasingly spilling over into weaker consumption and sluggish small-business sales,” said Rep. Park Sung-hoon, who serves on the National Assembly’s Strategy and Finance Committee. “With high exchange rates constraining monetary policy, what is needed is not short-term lending restrictions, but a comprehensive strategy to reform financial structures and systematically manage debt risks.”
The data shows average debt per borrower has climbed for nine straight quarters, rising more than 2 million won over the past year alone. Much of that load falls on middle-aged earners. Borrowers in their 40s now carry an average bank debt of 114.7 million won—a record—while those in their 50s and under 30 also hit historic highs.
Notably, nonbank lending, which typically carries steeper interest rates, remains elevated, especially among older Koreans. Borrowers aged 60 and above held an average of 55.1 million won in nonbank loans, far above the 39.5 million won average for those under 30.
Economists warn the concentration of debt among a smaller, more leveraged segment of the population could stifle consumer spending and weaken Korea’s economic resilience. With the won facing persistent pressure and inflation still a concern, the Bank of Korea has limited room to support highly indebted households through rate cuts.
“High household leverage is no longer just a financial stability issue—it’s a direct drag on growth,” said Lim Hyung-kyu, an economist at the Korea Economic Research Institute. “When debt service costs rise or income stagnates, these households pull back sharply on spending, which reverberates through the services sector and small businesses.”
South Korea’s household debt-to-GDP ratio, long among the highest in the developed world, has turned into a structural headwind. Policymakers now face a delicate balancing act: how to encourage deleveraging without precipitating a sharp drop in consumption or a wave of defaults.
Some analysts argue that targeted measures—such as restructuring support for low-income, high-debt households—are urgently needed alongside broader efforts to cool the property market, which has been a primary driver of mortgage borrowing.
“The numbers tell a clear story: debt is accumulating faster than incomes, and it’s being shouldered by fewer people,” said Park Sang-in, a professor of economics at Seoul National University. “Without a coordinated policy approach, this debt overhang will continue to limit Korea’s growth potential and expose the economy to greater shock.”
