"Even Using Your Entire Salary to Repay Debt Isn't Enough"—Household Loan Risk Signal Flashing Again

[Financial News] The share of household-loan borrowers who must devote more than their annual income to repaying loan principal and interest has begun rising again after three and a half years.
According to data submitted by the Bank of Korea (BOK) to Park Sung-hoon, a People Power Party lawmaker on the National Assembly Political Affairs Committee, 7.1% of all borrowers had a Debt Service Ratio (DSR) of 100% or higher at the end of the second quarter this year.
That was up 0.1 percentage points from 7.0% at the end of the previous quarter, marking the first increase in 14 quarters since the end of 2022.
The DSR refers to annual loan principal and interest payments as a percentage of annual income. A figure above 100% means that a borrower would still fall short even after using all of their annual income to repay debt.
The share of household-loan borrowers with a DSR of 100% or higher had been declining from 9.1% at the end of 2022 to 8.3% in 2023, 7.7% in 2024 and 7.3% in 2025. The decline continued through the end of the first quarter this year, but the trend reversed in the second quarter.
Loans held by these borrowers accounted for 23.6% of the total outstanding household loans at the end of the second quarter. The figure was up 0.2 percentage points from 23.4% at the end of the previous quarter, also marking the first increase in 14 quarters.
In other words, about 7% of borrowers held roughly one-quarter of all loans. By contrast, borrowers with a DSR below 40% made up 71.1% of all borrowers but held just 39.8% of the loans.
The average DSR for all borrowers rose from 35.8% at the end of the first quarter to 36.0% at the end of the second quarter, an increase of 0.2 percentage points. The indicator exceeded its previous-quarter level for the first time in nine quarters since the end of the first quarter of 2024.
Among vulnerable borrowers—those with debts at three or more financial institutions who are either in the bottom 30% by income or have a credit score of 664 or lower—the debt burden showed signs of easing. The share of borrowers in this group with a DSR of 100% or higher fell from 21.0% at the end of the first quarter to 20.7% at the end of the second quarter, a decline of 0.3 percentage points.
[email protected] Kim Tae-il Reporter