Households spend up to 40 percent of monthly paychecks to pay interest plus principal on loans to local banks according to the Bank of Korea.
Citing a survey of 2,119 Korean households, the Bank of Korea said about 8 percent responded that they use 40 percent of their salaries a month to repay their debt.
More than 60 percent said that they are struggling to meet deadlines in repaying their loans, indicating that rising household debt needs to be urgently resolved.
Household debt was the biggest systemic risk to the Korean economy, followed by foreign exchange volatility on a weak yen and falling house prices, according to another recent survey by the BOK.
About 57 percent of households have taken out a loan to pay for their housing, living expenses and leases.
Inflation and housing price stability were picked as the top factors that the government should keep in mind when devising and implementing its economic policy, followed by growth and job rates, and income distribution.
The central bank conducted the survey in December last year.
The total household debt of Koreans rose to a record 959.4 trillion won during the last quarter of last year, undermining President Park Geun-hye’s election promise to expand the middle class.
By Park Hyong-ki (email@example.com)