Moon Jae-in, a frontrunner presidential hopeful from the Democratic Party, on Thursday announced his plans to fight the nation's mounting household debt by lowering the ceiling of interest rates and other measures.

The announcement came as outstanding household credit in South Korea jumped to 1,344.3 trillion won ($1.18 trillion) in the final quarter of 2016, up 11.7 percent from a year earlier.

Moon Jae-in, former head of the Democratic Party, speaks during a session on household debt held in Seoul on March 16. (Yonhap)
"(The household debt), increasing at a rapid speed, holds high risks of being insolvent," Moon said, claiming that the rise is attributable to former presidents Lee Myung-bak and Park Geun-hye as they induced South Koreans to purchase properties using loans.

The former head of the Democratic Party said he, if elected president, will focus on generating more jobs and increasing household incomes to improve South Koreans' capabilities to repay debt.

"I will focus on protecting the consumers of financial services, instead of the financial institutions," Moon said.

In detail, Moon said he will limit the maximum interest rates on loans to 20 percent, down from the existing ceiling of 25 percent, to help reduce interest payment burdens on low-income borrowers. He also vowed to establish financial instruments to provide loans with 10-percent-level interest for the low-income bracket.

The president hopeful said he will make loans increase at a slower pace compared to the rise of incomes.

"I'll try to ensure that the ratio of household debts in disposable income will not be higher than 150 percent," Moon added. (Yonhap)