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Young People Get Recklessly into Debt

An alarmingly large number of Koreans in their 20s are deeply in debt. They are often still undisciplined in their spending habits and know little about financial planning despite being officially of age.

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The Financial Supervisory Service recently surveyed adults on their understanding of personal finance and found that those between 18 and 29 scored only 60.3 points, compared to 69.6 points for 30-somethings, 71.3 points for 40somethings and 69 points for those aged 50 to 64.

Young people lacked a basic understanding of money management. Asked if they check whether they can afford a product before purchasing it or whether they make their credit card payments and other bills on time, only 60 percent said yes. That compares to 80 percent in the other age groups.

This may be the reason that young people are getting into debt faster than any other age group. One in four ends up defaulting on their debt. And more than 10 percent of credit delinquents in their 20s who are struggling to pay off high-interest debt owe money to at least three different lenders.

The proportion is 12.2 percent, according to National Information and Credit Evaluation, the highest among all age groups.

The figure for 30-somethings is only 6.3 percent. Debtors in their 20s also prefer to have their debts written off instead of paying it back by earning money.

The Credit Counseling and Recovery Service said 11,655 people in their 20s are credit delinquents, with 72.6 percent applying to have their debts written off less than a year after they start missing their repayments.

Among credit delinquents in their 30s, only 54.5 percent turn to state aid to pay off their debts after less than a year. The figure drops to 44.8 percent for those in their 40s and 42 percent for those in their 50s.

According to court data from 2012, people in their 20s accounted for 13.5 percent of all applicants for debt relief, making up the largest group, followed by applicants in their 50s (12.5 percent) and 60s or above (2.5 percent).

Experts say while many young people are in debt because they have difficulty finding a stable job, some simply lose control of their credit card spending.

Lee Min-hwan at Inha University said, "Young people often believe it is better for them to have their debts written off and have few reservations about taking out loans to fuel their spending habits. They need to be educated on how much trouble they may find themselves in if they borrow beyond their means".

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