31.9 Trillion Won in Mid-Interest Rate Loans to be Supplied, Interest Rates Cut by Up to 5.2 P.P.

The Hankyoreh reports on the South Korean government's proactive measures to support individuals with intermediate credit ratings through an expanded mid-interest rate loan program. This initiative, totaling 31.9 trillion won, aims to alleviate the financial burden on a crucial segment of the population often caught in a difficult position between prime borrowers and those requiring more heavily subsidized support.

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The Financial Services Commission announced these measures as part of its plan to revitalize mid-interest rate lending.

A key component of this plan is the restructuring of the 'Saitdol Loan,' a policy product designed to bridge the gap in lending. By shifting the focus to borrowers in the 20th to 50th percentile of creditworthiness, the government intends to lower interest rates by up to 5.2 percentage points. This adjustment is crucial in addressing the 'interest rate cliff' – the sharp increase in interest rates faced by individuals whose credit scores fall just outside the range for prime bank loans, pushing them towards higher-cost second-tier financial institutions.

Furthermore, the introduction of a dedicated mid-interest rate loan product for sole proprietors is a significant step. This acknowledges the unique financial needs of small business owners and aims to provide them with more accessible credit by considering business-specific information like revenue and operating history. The loan limit for these entrepreneurs will also be increased from 20 million to 30 million won.

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The Saitdol loan is a credit loan product created by the government and the banking sector, supplied through the guarantee of the Seoul Guarantee Insurance.

From our perspective at The Hankyoreh, these measures are a welcome development in promoting financial inclusivity. By actively intervening to lower interest rates and expand access to credit for the middle-credit segment, the government is working to create a more stable financial environment. This policy not only aims to ease the immediate pressure of high interest rates but also to foster a healthier credit market by reducing the risk of individuals falling into severe debt due to unfavorable lending terms.

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The interest rate for the 'Saitdol 1' in commercial banks is expected to decrease from 7.3-14.5% to 7.1-9.3%, and the interest rate for 'Saitdol 2' in second-tier financial institutions like savings banks is expected to decrease from 11.1-17.2% to 11.2-14.6%.