[Financial Services Commission Report] Promotion of Mandatory Principal Installment Repayment for High-Amount Credit Loans

2021 Business Plan Announcement

[Asia Economy Reporter Kim Hyo-jin] Financial authorities are planning to mandate principal installment repayments for high-value unsecured loans.

The Financial Services Commission announced its 2021 work plan including this measure on the 19th.

The financial authorities decided to implement this plan to strengthen the management of large unsecured loans, which have rapidly increased in recent years. The plan mandates principal installment repayments for unsecured loans above a certain amount.

Currently, unsecured loans require monthly interest payments until maturity, but under the new plan, borrowers will have to repay both principal and interest together.

The plan also aims for a soft landing through appropriate management levels. For example, it intends to respond flexibly with the goal of restoring the household loan growth rate within the next 2 to 3 years to the 2019 level before the COVID-19 outbreak.

Financial authorities will also consider applying differentiated measures for extending regulatory flexibility and normalization to financial companies with a high proportion of unnecessary loans, rather than those responding to COVID-19.