South Korean Lending Company Loans Surge to 3.5-Year High

New loans issued by South Korean lending companies sharply increased in the fourth quarter of 2025, reaching the highest level in three and a half years. This rise is attributed to borrowers with mid-range credit scores being excluded from traditional financial institutions due to tightened lending regulations.

Loan Volume and User Growth

According to data submitted to the National Assembly by the Financial Supervisory Service, the 30 largest lending companies in South Korea disbursed 795.5 billion won in new loans during the fourth quarter of 2025. This represents a 23% increase compared to the 646.8 billion won issued during the same period the previous year, and an 8% increase from the previous quarter (736.6 billion won). The volume is nearly four times higher than the 200 billion won recorded in the first quarter of 2023, a period marked by liquidity issues and rising funding interest rates following the ‘Legoland incident.’

The number of new borrowers also saw a significant increase, rising from approximately 60,000 to 78,991 in the third quarter of 2025 and further to 87,227 in the fourth quarter.

Shift in Borrower Profile

Analysts suggest that the increase in lending company loans is driven by individuals with moderate credit ratings who are facing difficulties securing funding from banks and other traditional financial institutions due to stricter government lending rules. Ahn Yong-seop, director of the Microfinance Research Institute, noted that lending companies are increasingly catering to borrowers with credit scores of 6 to 7, a shift from previously focusing on those with scores of 7 to 8.

Concerns over Increased Risk

This trend raises concerns that individuals with lower credit scores, who previously relied on lending companies, may be priced out of this market and forced to turn to illegal private lenders. While registered lending companies are subject to a legal interest rate cap of 20% per annum, the average interest rate for illegal private financing is significantly higher, reaching 535% as of 2023.