Low-Income South Koreans with High Credit Scores Can Now Get Loans of Up to 1 Million Won to Avoid Illegal Lenders

Financially vulnerable South Koreans can now qualify for loans of up to 1 million won even if they have relatively high credit scores, under relaxed rules for the Illegal Private Finance Prevention Loan.

The Financial Inclusion Agency said recipients of basic livelihood security benefits, near-poor households and earned-income tax credits will no longer face a credit-score requirement. The annual income limit of 35 million won remains in place.

The policy loan targets people who struggle to use mainstream financial services and need urgent money for living expenses. Previously, applicants had to earn no more than 35 million won and rank in the bottom 20% of credit scores, defined as 749 points or below under NICE or 700 points or below under KCB. The agency said this excluded some low-income people whose credit scores were comparatively high.

The annual interest rate is 12.5%. A reduced rate of 9.9% applies to basic livelihood security and near-poor recipients, self-reliance workers, earned-income tax credit recipients, registered disabled people, single-parent and grandparent-led families, multicultural families and North Korean defectors. Borrowers who use the loan for at least six months, repay it in full and borrow again can receive a rate of 4.5%.

Borrowers repay principal and interest in equal installments over two years, with no early repayment fee. Applications are available at 52 integrated financial support centers nationwide. The Financial Inclusion Agency can be reached at 1397, while the Financial Supervisory Service accepts reports of illegal private lending at 1332. The agency also notes that lending contracts with annual interest above 60% are invalid in both principal and interest.