Banks Raise Credit Loan Interest Rates One After Another... "It Becomes Harder to Get Loans Cheaply" (Comprehensive)

Woori Bank, KakaoBank Adjust Credit Loan Interest Rates
Preferred Rates Reduced and Interest Rates Raised Following Financial Authorities' Call for Slower Pace
Other Banks Likely to Join the Wave of Increases

A scene at a commercial bank counter. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Min-young] Banks are increasingly raising interest rates on unsecured loans. This move is seen as a response to recent orders from financial authorities to slow down the rapid growth of unsecured loans driven by "debt investment" (bit-tu) and "all-in borrowing" (young-kkeul). After receiving management plans for unsecured loans from major banks, the financial authorities are reviewing whether additional measures are necessary.

According to the financial sector on the 25th, Woori Bank announced that starting from the 6th of next month, it will lower the maximum preferential interest rate on its main unsecured loan product, "Woori Main Transaction Employee Loan," from 1.0% to 0.6%, a reduction of 0.4 percentage points.

The bank will remove the preferential interest rate condition for utility bills and management fees (0.1%) from the product and reduce the interest rate benefits granted to companies selected as excellent companies from 0.4% to 0.2%. Additionally, benefits for main transaction companies will be lowered from 0.2% to 0.1%. Furthermore, the event to attract new employees of excellent companies (0.1%), which was planned to continue until the end of the year, will be ended early.

KakaoBank also announced that starting today, it will raise the minimum interest rate on unsecured loans for employees from 2.01% to 2.16%. The increased rate is applied immediately.

K Bank raised interest rates on unsecured loans and overdraft accounts by 0.10 percentage points and 0.20 percentage points respectively from the 18th, bringing the minimum rates to 2.11% and 2.61%.

Earlier, on the 14th, the Financial Supervisory Service held a video conference with the five major commercial banks (Shinhan, KB Kookmin, Hana, Woori, NH Nonghyup) and KakaoBank, raising concerns about unsecured loans that could be excessively used by high-income and high-credit borrowers. In response, financial companies have started their own management plans. Banks are expected to submit plans including measures to reduce total loan volume to the Financial Supervisory Service by the end of the day.

The Financial Supervisory Service requested commercial banks to report by today the household loan balances by loan category until August, monthly household loan balance plans until December, credit loan limit calculation plans, maximum limits per borrower, and limit calculation methods for refinancing loans from other banks.

According to the Financial Services Commission, the increase in unsecured loans in the financial sector last month reached 6.2 trillion KRW, which is 2.8 trillion KRW more than the 3.4 trillion KRW increase during the same period last year. The increase in unsecured loans in the financial sector, which was only 200 billion KRW in January this year, surged to 3.7 trillion KRW in June and 4.2 trillion KRW in July.