South Korean households' debts owed to the nonbanking sector spiked over the past two months, suggesting that those with low credit ratings opted to borrow money despite relatively higher interest, central bank data showed Sunday.
According to the data by the Bank of Korea, the outstanding household debts owed to the nonbanking sector stood at 252.86 trillion won ($221.2 billion) as of end-February, up about 4.2 trillion won from what was tallied at the end of last year.
The nonbanking sector includes savings banks and other companies in the deposit business. Insurers, brokerages and card firms that extend loans were excluded.
They usually allow those with low credit to borrow money in return for relatively higher interest rates.
Market experts said that a protracted low interest rate and recently toughened credit screening by banks encouraged many to opt for nonbanking financial firms despite their relatively higher borrowing costs.
During the two-month period, mortgage loans grew by about 1.6 trillion won, while other borrowings, including credit loans, expanded by 2.6 trillion won, the data showed.
The combined amount of the loans taken out by households during the cited period was the largest since the central bank started to compile related data in November 2003.
The previous two-month record was 1.7 trillion won recorded in January and February of 2014. In the same period last year, households borrowed 640.9 billion won from the nonbanking sector, the data showed. (Yonhap)