• International Journal of Human Ecology
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• v.9 no.2
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• pp.77-92
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• 2008

This study investigates the characteristics of young debtors at risk of repayment problems. A cumulative logistic model is used in order to examine the effects of explanatory variables on the probability for young adults to pay off debt obligations. The following conclusions can be drawn from the results. First, the high indebtedness of young debtors increases the probability of payment delinquency whereas high income by young debtors decreases the probability. Second, financial emergencies that young debtors experienced and payment delinquency are positively related. Finally, financial resources for emergency needs reduced the probability of being delinquency on payment of household debt.

• Journal of Family Resource Management and Policy Review
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• v.23 no.2
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• pp.99-115
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• 2019

This study examined the insolvency likelihood of young debtors from the 2018 Household Financial and Welfare Survey. This study used the Household Default Risk Index (HDRI), which considers the ratio of total debt to total assets (DTA), and a total debt service ratio (DSR) to examine the insolvency level of debtors. The descriptive analyses showed no difference in frequency of households with a high probability of insolvency between those less than 35 years of age and those over 35 years of age. However, the median HDRI value for those less than 35 years of age was higher than those over 35 years of age. The multivariate analyses indicated that educational expenses for young Korean debtors was a factor that increased their probability of insolvency, while income was the only variable that decreased their insolvency likelihood.

• KDI Journal of Economic Policy
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• v.38 no.4
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• pp.23-44
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• 2016

Household debt in Korea raises concerns about the resilience of the economy due to its size and quality. Against this backdrop, we investigate if household leverage matters for private consumption in adverse economic environments even without severe financial disruptions. We find that the balance sheet positions in terms of the leverage ratio may weaken consumption growth. We also find that the depressive effect of debt on consumption may differ across types of consumer spending and household characteristics. In particular, the effects of indebtedness have been much stronger in relation to durable goods expenditures than in other areas. In addition, debtors in high-income (wealth) groups have also shown downward adjustments in consumption even more so than low-income (wealth) groups. These findings imply that debtors' precautionary behavior may serve as an important channel from leverage to consumer spending.

• KDI Journal of Economic Policy
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• v.32 no.4
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• pp.1-34
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• 2010

We conduct a comprehensive risk analysis of household debt in Korea for the first time using the whole sample credit bureau (CB) data of 2.2 million individual debtors. After analysing debt service capacity profiles of debtor groups classified by the borrower characteristics such as income, age, occupation, credit scoring, and the type of creditor business companies, we investigate the impact of interest rate and income changes on debt service-to-income ratios (DTIs) and default rates of respective debtor groups. Empirical results indicate that debt service burdens are relatively high for low income wage earners, high income self-employed, low income capital and card loan holders, and high income mutual savings loan holders. We also find that debtors from multiple financial companies are particularly weak in their debt service capacity. The scenario analysis indicates that financial companies, with the current level of capital buffers, may be able to absorb negative consequences arising from the increase in DTIs and loan default rates if the interest rate and income changes remain modest. However, the negative consequences may fall disproportionately on non-bank financial companies such as capital, credit card, and mutual savings banks, whose debtors' DTIs are already high. We also find that the refinancing risk of household debt is relatively high in Korea as more than half of household mortgage debts are bullet loans. As the DTIs of mortgage loan holders are already high, under the current DTI regulation, mortgage loans may not be readily refinanced especially when the interest rate rises. Disruptions in mortgage loan refinancing may put downward pressure on housing prices, which may in turn magnify refinancing risk under the current loan-to-value (LTV) regulation. Overall our analysis suggests that, for more effective monitoring of household debt risk, it is necessary to combine existing surveillance schemes based on macro aggregate indicators with more comprehensive and detailed risk analyses based on micro individual data.