Register payroll info, check transfer details to secure rate discounts
Delinquency can trigger early repayment demand; rates may change at renewal
A borrower surnamed Kim took out a personal credit loan from Bank A and agreed to a 0.4 percentage point rate discount in exchange for having his salary deposited there — but never received the benefit. Although he had been transferring his pay to the account all along, he had not registered his employer's name, payday, and other payroll details in the bank's app.
A borrower surnamed Lee ran into a similar problem with a jeonse loan at Bank B. She transferred 1 million won to the account every month but was denied a 0.2 percentage point rate reduction because she had not labeled the transfers as "salary," leaving the bank's system unable to recognize them as payroll deposits.
The Financial Supervisory Service released these and other cases Monday, highlighting conditions that borrowers commonly overlook — preferential interest rate requirements, repayment structures, loss of maturity benefits from delinquency, and rate changes at loan renewal — and urged consumers to take care.
The FSS said the guidance was based on actual financial complaints it had received.
The regulator said borrowers must meet the specific criteria set by their bank to qualify for a payroll-transfer rate discount.
For non-face-to-face loans, borrowers must register their employer's name, payday, and payroll account in the bank's app. Those who receive their salary at a different bank must include a label such as "salary," "wages," "monthly pay," or "bonus" in the transfer memo when moving funds to the lending bank's account — otherwise the discount may not apply. Borrowers who change jobs may also need to update their payroll information.
Repayment structures also deserve close attention. Bullet repayment — where only interest is paid during the loan term — keeps monthly costs low but requires the full principal to be repaid at maturity. Equal principal-and-interest repayment keeps monthly payments fixed but results in higher total interest than equal principal repayment. Equal principal repayment carries heavier payments early on but results in the lowest total interest cost of the three methods.
Sustained delinquency can trigger a loss of maturity benefit, meaning the borrower loses the right to repay over the remaining loan term. For household loans, this kicks in when a borrower misses one month of interest payments or fails to make two or more consecutive monthly installments. For mortgage loans, the thresholds are two months of missed interest and three consecutive missed installments.
Once the maturity benefit is lost, the borrower must repay the entire outstanding balance immediately, and overdue interest is in principle charged on the full remaining principal. However, if the loan principal is less than 50 million won, overdue interest is applied only to the monthly installment amount until maturity. Banks are in principle required to notify the borrower at least seven business days before the maturity benefit is forfeited.
Interest rates can change when a loan is extended at maturity. Variable-rate loans consist of a benchmark interest rate and a spread, both of which are recalculated at renewal. If a borrower's creditworthiness has deteriorated significantly, the bank may refuse to extend the loan or may demand a higher rate, a shorter term, or partial early repayment.
The FSS urged borrowers to check preferential rate conditions, repayment structures, penalties for delinquency, and renewal terms in advance, and to manage their credit carefully.
Meanwhile, the FSS also released a set of recurring credit card complaint cases in June, warning consumers to exercise caution. Key cases included unauthorized overseas transactions, revolving credit, replacement cards for discontinued products, and annual fee refund disputes. The regulator particularly warned that revolving credit is a high-interest, loan-type arrangement with an average fee rate exceeding 15 percent, and urged consumers to avoid relying on it over the long term.
rim@heraldcorp.com
