South Korea launches mid-interest rate loan for low-credit individuals

South Korea has introduced a new loan product aimed at supporting individuals with lower credit scores. Six savings banks, KB, OK, SBI, Shinhan, Yegaram, and Korea Investment Savings Bank, began offering the "Mid-Interest Rate Living Stability Loan" on June 29th.

This initiative targets individuals whose credit scores fall within the bottom 50% of the population, as defined by credit rating agencies. The loan aims to alleviate financial difficulties for this demographic by providing access to credit at more manageable interest rates. The annual interest rates for the loan will range from a minimum of 5.9% to a maximum of 15.27%, determined by the borrower's creditworthiness.

Borrowers can access up to 10 million won through this program. A key condition is that the funds must not be used for purchasing a home. Loan terms can be extended even if the borrower's credit rating improves to high-credit status by the repayment deadline, provided they met the eligibility criteria at the time of the initial loan. The maximum interest rate has been lowered by 1.24 percentage points compared to existing mid-interest rate loans, which previously capped at 16.51%.

The Financial Services Commission announced plans to broaden the availability of similar loans in the latter half of the year. Approximately 14 additional savings banks, along with commercial banks, credit card companies, and capital firms, are expected to launch their own versions of the "Mid-Interest Rate Living Stability Loan." Last year, policy-backed mid-interest rate loans totaled 2.99 trillion won, while private mid-interest rate loans reached 27.81 trillion won.