15 savings banks offering lifestyle stability loans
Up to 10 million won for low- to mid-credit borrowers in bottom 50%
Borrowers must pledge not to buy housing for one year or until full repayment
A mid-rate "lifestyle stability loan" introduced by financial regulators as part of an inclusive finance push has surpassed 250 billion won ($187 million) in cumulative disbursements at savings banks within two months of its launch. As household lending restrictions remain tight, the product has emerged as a new emergency credit channel for lower-income borrowers, drawing particular attention for being exempt from the annual income cap on personal credit loans.
Cumulative disbursements of the mid-rate lifestyle stability loan at savings banks reached 251.6 billion won as of the end of August, according to financial industry sources Monday.
The loan is a privately offered mid-rate product created under a "mid-rate loan revitalization plan" that financial authorities unveiled in April. Six savings banks — KB, OK, SBI, Shinhan, Yegaram and Korea Investment — began offering it at the end of June, and they have since been joined by BNK, NH, Goryeo, JT Chinae, Kiwoom and Daol savings banks, bringing the total to 15 institutions. Given steady demand, more financial firms, including non-bank lenders, are expected to join.
The loan targets borrowers with credit scores in the bottom 50 percent. They can borrow up to 10 million won for emergency living expenses at annual interest rates ranging from 5.90 percent to 15.27 percent — a maximum rate 1.24 percentage points lower than that of existing mid-rate loans at 16.51 percent. Borrowers must pledge not to purchase housing for one year or until the loan is fully repaid, a condition designed to prevent the funds from being used for property speculation. Violating the pledge triggers immediate repayment and bars the borrower from housing-related loans and this product for three years.
The product's popularity is largely attributed to its exemption from the annual income cap on personal credit loans. The government last year capped individual credit loan limits at the borrower's annual income to rein in household debt. That restriction made it difficult for borrowers who had already maxed out their limits at commercial banks to take on additional debt at savings banks — but the lifestyle stability loan allows borrowing beyond annual income.
"The annual income cap has been a far bigger obstacle on the ground than the overall household lending ceiling," a savings bank official said. "This product is opening up credit channels for mid- to low-credit borrowers who were blocked by regulations and giving lenders a new lending avenue, so more financial firms are likely to want in."
However, the targeted support has drawn criticism that government policy is pulling in opposite directions. While authorities have raised borrowing barriers in the name of managing household debt, they have simultaneously rolled out a series of exemption products — such as expanded mid-rate loan supply — under the banner of promoting inclusive finance.
"If the government genuinely wants to boost the supply of funds for lower-income borrowers, it should ease the income limit itself to 1.5 or two times annual income," a savings bank industry official said.
won@heraldcorp.com
