"Actual Situation May Be More Serious" COVID-Driven Risks Surface... Warning Light for Delinquency Rate on Self-Employed Loans

End of COVID-19 Financial Support and High Interest Rate Environment Lead to Growing Insolvency

The overdue loan rate for self-employed individuals has continued to rise for the fourth consecutive year. As the risks that were postponed during the COVID-19 pandemic by loan maturity extensions and repayment deferrals are now surfacing, the burden of repayment for small business owners is increasing due to a combination of high interest rates and delayed economic recovery.

Cheongnyangni Market, Dongdaemun-gu, Seoul. Photo by Yonhap News Agency

According to statistics on overdue Korean won-denominated loans submitted by the Financial Supervisory Service to the office of Heo Young, a member of the National Assembly’s Political Affairs Committee from the Democratic Party of Korea, the overdue loan rate for self-employed individuals stood at 0.63% at the end of December 2025. This is a slight increase from 0.6% at the end of 2024. Compared to the end of December 2015 (0.34%), the rate has risen by 0.29 percentage points over a decade.

The overdue rate for self-employed individuals fell from 0.34% at the end of 2015 to 0.16% at the end of 2021, but has since reversed course and begun to climb again. It rose to 0.26% at the end of 2022, 0.48% at the end of 2023, 0.6% at the end of 2024, and 0.63% at the end of 2025, showing a steady increase over the past four years.

This trend is interpreted as a result of latent risks materializing after the loan maturity extensions and repayment deferrals implemented immediately after the onset of COVID-19. Additionally, persistent high inflation and high interest rates since the pandemic have delayed economic recovery, further increasing the repayment burden for self-employed borrowers.

This trend contrasts with the declining overdue loan rate among large corporations. The overdue rate for large companies steadily decreased from 0.92% at the end of 2015, when corporate restructuring was underway, to 0.5% at the end of 2019, 0.27% at the end of 2020, and 0.12% at the end of last year.

An official from the financial sector stated, "Although banks are clearing overdue loans through sales or write-offs, the overdue rate is still rising. The actual level of bad debt may be even more serious than these statistics suggest."

This content was produced with the assistance of AI translation services.