South Korea's Older Borrowers Face Rising Arrears and Costly Debt as Retirement Nears

Older borrowers carry the largest vulnerable loan balances

South Koreans aged 60 and above accounted for 19.9% of financially vulnerable borrowers in the second quarter of 2026, up from 15% at the end of 2021, according to Bank of Korea figures submitted to People Power Party lawmaker Kim Sang-hoon. Their average outstanding loan balance reached 97.87 million won, the highest among the age groups measured.

The figures, disclosed in October 2026, show three pressures converging: more older people entering the vulnerable borrower group, large debts remaining as working income declines, and substantial borrowing from lenders charging more than commercial banks. Nearly one in five vulnerable borrowers was at least 60.

The household loan delinquency rate for people aged 60 and above rose from 0.7% in 2021 to 1.5% in the second quarter of 2026. A delinquency rate measures the share of lending that has fallen behind on repayment. The increase was 0.8 percentage points, taking the rate to more than twice its earlier level.

Bank of Korea data submitted to another People Power Party lawmaker, Park Sung-hoon, add a sharper measure of repayment pressure: 25.8% of vulnerable borrowers aged 60 and above owed annual principal and interest payments at least equal to their annual income. For those households, scheduled debt payments alone could consume everything they earned.

Who falls into the vulnerable borrower group?

The Bank of Korea compiled its figures using a household debt database containing credit information on approximately 2.35 million people. It defines vulnerable borrowers as people borrowing from at least three financial institutions who also have low incomes or low credit scores.

The figures submitted to Park specify income in the bottom 30% or a credit score of 664 or below. Someone must therefore meet both the multiple borrowing condition and at least one of those financial vulnerability conditions. Having several lenders matters because each loan brings a repayment obligation, while limited income leaves less room to absorb an unexpected bill or a loss of earnings.

People aged 60 and above had an average vulnerable borrower loan balance of 97.87 million won, compared with 82.80 million won for those in their 50s and 81.88 million won for those in their 40s. Borrowers aged 30 and younger averaged 48.49 million won.

The oldest group's average was just over twice that of the youngest group, a difference of 49.38 million won. It also exceeded the average for borrowers in their 50s by 15.07 million won. Older vulnerable borrowers therefore entered this period of rising repayment pressure with substantially more debt per person.

A growing share of vulnerable borrowers is older

People aged 60 and above increased their share of vulnerable borrowers by 4.9 percentage points between the end of 2021 and the second quarter of 2026. Over the same period, the share aged 30 and younger fell from 33.7% to 30.8%.

The figures submitted to Park provide another comparison, starting in the second quarter of 2023. From that point, the oldest group's share rose from 16% to 19.9%, while the youngest group's share fell from 34.5% to 30.8%. People in their 40s declined from 27.5% to 26.1%, and those in their 50s increased from 22% to 23.2%.

Younger people still formed the largest vulnerable borrower group in the second quarter of 2026. The change is in the balance between generations: the share aged 60 and above rose faster than that of people in their 50s, while both younger groups lost share.

South Korea's second baby boomer generation, born from 1964 to 1974 and numbering approximately 9.54 million people, began turning 60 in 2024. Many members of this generation borrowed to buy homes and pay for their children's education. Their arrival at retirement age places debt accumulated during working life alongside the prospect of lower earnings.

Why the type of lender matters

Borrowers aged 60 and above had an average bank household loan balance of 80.29 million won in the second quarter of 2026, compared with 91.62 million won at nonbank institutions, according to the Bank of Korea figures submitted to Park. The nonbank figure was 11.33 million won higher. This was the only age group whose average nonbank balance exceeded its bank balance.

Nonbank institutions include savings banks, credit unions and community credit cooperatives. Their interest rates vary considerably. In August, savings bank household loans carried an average annual rate of 13.38%, compared with 4.76% at banks. The savings bank rate was about 2.8 times the bank rate, with a gap of 8.62 percentage points.

Credit unions averaged 5.28%, while mutual financial institutions averaged 4.88%. Both were above the bank average, but much closer to it than the savings bank rate. The lender category therefore matters when assessing how expensive an older person's debt has become.

For a simple illustration, a constant balance of 10 million won would generate approximately 1.338 million won in annual interest at 13.38%, compared with 476,000 won at 4.76%. The difference is 862,000 won before fees or changes in the balance. Actual payments depend on the loan terms and repayment schedule.

Seok Byung-hoon, a professor at Ewha Womans University, described how falling income after retirement can narrow access to bank credit:

Elderly borrowers often face reduced loan limits or rejections from banks post-retirement, pushing them toward secondary financial institutions.

The 97.87 million won average for older vulnerable borrowers and the bank and nonbank averages describe different borrower groupings. The first measures the vulnerable group; the other figures describe lending to borrowers aged 60 and above within each lender category.

When debt payments consume a year's income

Among vulnerable borrowers aged 60 and above, 25.8% faced annual principal and interest payments equal to or greater than their annual income in the second quarter of 2026. The corresponding share for borrowers aged 30 and younger was 11.4%, making the older group's share about 2.3 times as large.

Principal is the money originally borrowed; interest is the cost of borrowing it. A household earning 24 million won a year and owing at least that amount in scheduled annual debt payments would have no earnings left for food, housing or other expenses after meeting those payments. Savings, family support or a change to the repayment terms would become crucial.

Yoon, a restaurant worker aged 64, illustrates the pressure that repeated borrowing can create. He earned around 2 million won a month and borrowed when living expenses exceeded his income. His debt eventually reached 50 million won across six lending companies and savings banks as he took new loans to repay existing obligations.

Yoon had paid interest approaching 20% a year for nearly four years, yet his principal had barely fallen. At a constant balance of 50 million won, a 20% annual rate would mean about 10 million won in yearly interest, or roughly 833,000 won a month. That illustration amounts to more than two fifths of his stated monthly earnings, before any principal repayment.

His situation shows why continuing to work may still leave an older borrower struggling. When interest consumes much of a modest wage, making regular payments can leave little capacity to reduce the original debt.

Business losses can reach the whole household

A furniture company owner in his early 60s faced a sudden fall in sales after a customer went bankrupt. He turned to bank loans and credit card borrowing, and his debt grew by approximately 200 million won. His household then relied on his spouse's monthly income of around 2 million won while he also supported his elderly mother.

The additional debt alone was equivalent to more than eight years of that spouse's stated income, calculated at 24 million won a year. Household living costs and interest payments would also have to come from the family's resources. A failed commercial relationship had become a problem extending across three generations.

Another man in his 60s, who operated a convenience store, saw sales fall by half. He used card loans and savings bank loans for operating expenses and daily living costs because his existing borrowing made obtaining more commercial bank credit difficult. His total financial debt reached 85 million won.

Lee Jung-hee, a professor at Chung-Ang University, described the risks facing older people who keep working or enter business:

Many elderly continue working post-retirement to support families or start businesses late, but failure risks losing retirement assets and falling into poverty.

These households faced more than a retirement income problem. Business revenue, family support and personal loan payments were tied together. When sales dropped, borrowing helped meet immediate expenses while adding costs to subsequent months.

Arrears are rising across different measures

The age based household loan figures show a widening gap. Between 2021 and the second quarter of 2026, delinquency among borrowers aged 60 and above increased from 0.7% to 1.5%. For borrowers aged 30 and younger, it rose from 0.4% to 0.6%. The gap between these groups widened from 0.3 to 0.9 percentage points.

The Bank of Korea figures submitted to Park also measure people borrowing from three or more institutions. Within this multiple borrower group, the delinquency rate for those aged 60 and above was 2.4% in the second quarter of 2026, compared with 1.5% for those aged 30 and younger, 1.6% for people in their 40s and 1.8% for people in their 50s.

The 1.5% household loan figure and the 2.4% multiple borrower figure cover different populations. Both place the oldest group above younger borrowers, while the multiple borrower measure captures people managing obligations to several institutions.

The October account of the figures also describes consecutive Bank of Korea policy rate increases in July and August and signals of possible further increases. A policy rate influences borrowing costs through the financial system. Borrowers whose loan rates adjust can face higher interest bills, while those seeking fresh credit may encounter more expensive terms. No date or size was given for a further increase.

Retirement savings leave little room for setbacks

A 2023 survey by the Mirae Asset Investment & Pension Center found that 48.3% of 2,000 workers from the second baby boomer generation had saved less than half of the retirement funds they needed. Nearly half of that surveyed group therefore approached retirement with a large gap between their savings and their estimated needs.

For households carrying debt into retirement, savings may have to serve two purposes: paying ordinary living expenses and keeping loan payments current. Continuing employment can help cover both, but the business owners' experiences show how quickly that income can become uncertain.

The key dates trace how retirement preparation and borrowing pressure have developed:

• End of 2021: People aged 60 and above represented 15% of vulnerable borrowers; their household loan delinquency rate was 0.7% in 2021.
• 2023: The retirement survey found 48.3% of respondents had saved less than half of their required funds. In the second quarter, older people accounted for 16% of vulnerable borrowers.
• 2024: The second baby boomer generation began turning 60.
• Second quarter of 2026: The older group's vulnerable borrower share reached 19.9%, with an average loan balance of 97.87 million won.
• July and August 2026: The Bank of Korea raised its policy rate in consecutive months, according to the October account.
• October 2026: Figures submitted to lawmakers brought together evidence of larger debt burdens, costly nonbank borrowing and rising arrears.

The combined picture makes repayment capacity central to the problem. Older vulnerable borrowers have the largest average balances, and more than a quarter face scheduled annual debt payments at least as large as their annual income. For these households, a fall in earnings or an increase in interest costs can leave little room to keep payments current.

Key Points

• People aged 60 and above made up 19.9% of South Korea's vulnerable borrowers in the second quarter of 2026, up from 15% at the end of 2021.
• Their average outstanding vulnerable borrower loan balance was 97.87 million won, just over twice the 48.49 million won average for borrowers aged 30 and younger.
• The older group's household loan delinquency rate rose from 0.7% in 2021 to 1.5%; its multiple borrower delinquency rate was 2.4% in the second quarter of 2026.
• Annual principal and interest payments equalled or exceeded annual income for 25.8% of older vulnerable borrowers.
• August savings bank household loan rates averaged 13.38%, compared with 4.76% at banks.
• A 2023 survey found 48.3% of 2,000 second baby boomer workers had saved less than half of their required retirement funds.