South Korea's Poorest Households Record Highest Share of Credit Borrowing for Living Costs

Daily expenses take a larger share of borrowing

Living expenses accounted for 45.3% of unsecured credit borrowing purposes among South Korean households in the bottom fifth by assets in 2025, the highest share since the statistical series began in 2017. Among households in the bottom fifth by income, the share also reached a record, at 38.2%, up from 34.5% in 2024.

The figures, drawn from the National Data Agency's Korean Statistical Information Service (KOSIS), show how borrowing priorities differ across households. Living costs were the leading purpose for unsecured credit among the three lowest asset groups and the two lowest income groups. Business funding took first place among wealthier households.

For families with little money coming in or few assets to fall back on, borrowing for daily expenses creates a difficult repayment problem. The money meets an immediate need, while interest payments add another expense to future household budgets. Unsecured loans generally carry higher interest rates than loans backed by property.

Yang Jun-seok, a professor at Catholic University of Korea, called for direct government support for vulnerable households, or stronger government guarantees for loans to people on low incomes. His proposals address both sides of the problem: the shortage of money for necessities and the cost of obtaining credit.

The figures describe the distribution of purposes for unsecured credit within each household group. Income rankings and asset rankings offer different views of financial circumstances: income measures money coming in, while assets include holdings such as savings and property. Each ranking divides households into five groups of 20%, known as quintiles.

How the lowest asset group reached 45.3%

Households in the bottom asset quintile recorded a living expense share of 33.4% in 2017. By 2025, that had increased by 11.9 percentage points to 45.3%, meaning that daily expenses occupied a much larger place in their reasons for taking unsecured credit.

The increase was uneven. The share slipped slightly in 2019, rose above 40% in 2021, then fell in 2022 before reaching new highs in 2024 and 2025. The latest annual increase was one percentage point, from 44.3% to 45.3%.

• 2017: Living expenses accounted for 33.4% of unsecured credit purposes in the lowest asset group.
• 2019: The share stood at 33.1%.
• 2020: It rose to 36.0%.
• 2021: It reached 41.9%, passing 40% for the first time.
• 2022: It fell to 39.5%.
• 2024: It reached 44.3%.
• 2025: It increased to a record 45.3%.

Business funding moved in the opposite direction over the full period, falling from 25.2% in 2017 to 19.9% in 2025. Living expenses exceeded business funding by 8.2 percentage points at the start of the series; by 2025, the gap had widened to 25.4 points.

Debt repayment adds another demand on households

Repaying existing debt accounted for 16.2% of unsecured credit purposes in the lowest asset group in 2025, up from 10.1% in 2024. That increase of 6.1 percentage points was larger than the annual rise in the living expense share.

Living expenses and debt repayment together accounted for 61.5% of purposes in 2025, compared with 54.4% in 2024. The combination shows how prominently meeting current expenses and managing earlier borrowing featured in this group's use of credit.

Housing related purposes occupied smaller shares. Rental deposits accounted for 5.1%, purchasing a primary residence for 0.1%, and buying other real estate for 0.7%. Other purposes accounted for 12.6%.

Borrowing priorities change across asset groups

Living expenses were also the most common purpose for unsecured credit in the second and third asset quintiles, at 32.5% and 27.3%, respectively. Financial pressure associated with daily spending therefore extended beyond households with the fewest assets.

The second quintile's 32.5% matched its level in 2020 and was the highest since that year. The third quintile's 27.3% was the highest since 2019, when it reached 28.8%. Both groups remained below the 45.3% recorded by the lowest asset quintile.

Households in the fourth asset quintile borrowed most often for business funding, which accounted for 29.7%. Living expenses came next at 23.1%, a gap of 6.6 percentage points.

The contrast was strongest at the top. Among households in the wealthiest asset quintile, business funding accounted for 34.0%, while purchasing real estate other than a primary residence and other purposes each accounted for 16.8%. Living expenses stood at 15.1%.

The lowest asset group's living expense share was exactly three times the top group's, 45.3% against 15.1%, a difference of 30.2 percentage points. Borrowing to meet everyday needs occupied a far larger share of credit purposes among households with the smallest asset holdings.

The lowest income group sets a separate record

Households in the bottom income quintile recorded a living expense share of 38.2% in 2025, exceeding the previous record of 34.5% in 2024 by 3.7 percentage points. Living expenses were their largest category of unsecured credit purposes.

The second income quintile also reached its highest level since the series began in 2017, at 32.2%. Daily expenses ranked first in that group as well. Across the third, fourth and fifth income quintiles, business funding was more common than borrowing for living costs.

Research by Yang Jong-min, a professor at Inha University, offers a related perspective. His paper on debt ratios by purpose and attitudes toward welfare, using Korea Welfare Panel data, found that households on low incomes relied relatively more on debt for consumption, including living and medical expenses. Other households relied relatively more on borrowing for investment purposes, including housing.

Why unsecured credit can become expensive

Unsecured credit is borrowing without an asset pledged as collateral. With a secured loan, a lender has a claim on specified property if the borrower fails to repay. Without that protection, the lender takes a greater risk and generally charges a higher interest rate.

Households with limited income and assets can face an additional disadvantage because lenders assess their ability to repay and their credit history when setting loan terms. Borrowers judged more likely to miss payments may face higher rates even before a broader increase in borrowing costs.

Higher interest payments leave less money for the same expenses that prompted the loan. A household may then need further borrowing to fill the gap. If access to formal lenders narrows, it may turn to more expensive private lending, including illegal lenders.

Yang Jun-seok warned that rising interest rates could hurt borrowers and lenders at the same time:

When interest rates rise, it becomes harder for vulnerable households to repay their debt, and from the perspective of the lending institutions, bad loans will increase.

Direct support or stronger loan guarantees?

Yang argued that government support should address the need for living expense borrowing rather than leave each vulnerable household to obtain a loan on its own. He acknowledged that borrowing for necessities can be difficult to avoid.

The Catholic University of Korea professor described his preferred response:

Rather than having vulnerable households depend individually on loans from financial institutions, the right approach is for the government to provide direct support,

Direct assistance helps households meet expenses without adding a new repayment obligation. Income support and welfare assistance therefore address a different need from credit programs: they help close the household budget gap that creates demand for borrowing.

Yang also proposed an alternative where public spending constraints limit direct assistance:

If that costs too much fiscally, the government should at least seek ways to strengthen guarantee programs for low-income loans.

A government guarantee promises to cover an agreed portion of a lender's loss if a borrower cannot repay. By sharing that risk, the government can help lenders extend credit to people who might otherwise struggle to obtain it. The borrower still has a debt to repay.

Support needs to address both expenses and repayment

Calls for a broader response include expanding finance for people on low incomes, strengthening guarantees and reviewing debt restructuring. Restructuring changes repayment arrangements to make existing debt more manageable, while financial assistance can help meet immediate spending needs.

The 2025 figures make the practical challenge visible: living expenses account for a record share of unsecured credit purposes among the lowest income and asset groups, while repayment of earlier debt has also become more prominent in the lowest asset group. Support aimed at either new borrowing or existing debt alone would address only part of those household pressures.

No implementation timetable or funding amount was given for the proposals. The choices concern how much assistance should go directly toward necessities, how much lending risk the government should assume, and how to help households already struggling with repayment.

Key Points

• Living expenses reached 45.3% of unsecured credit purposes among the lowest asset quintile in 2025, a record since 2017.
• The lowest income quintile also set a record at 38.2%, up 3.7 percentage points from 2024.
• The lowest asset group's living expense share was three times the wealthiest group's 15.1%.
• Debt repayment rose to 16.2% of credit purposes among households in the lowest asset group.
• Proposals include direct government assistance, stronger loan guarantees and changes to debt restructuring.