Review of Easing Requirements for Dividing Principal Repayment of Personal Loans and Bogumjari Loan
[Asia Economy Reporter Kwangho Lee] Financial authorities will announce the 'Household Debt Management Plan' next month. The core is the uniform application of a 40% Debt Service Ratio (DSR) for each borrower.
According to the financial sector on the 28th, financial authorities are preparing to shift the DSR management method by financial companies to an assessment of repayment ability on a borrower-by-borrower basis.
Currently, since only the average by financial company needs to be managed, individual borrowers can exceed a 40% DSR, but from now on, 40% will be applied to all borrowers.
According to the office of Assemblyman Jeon Jae-su of the Democratic Party, the proportion of loans exceeding a 40% DSR among the five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?was 20% based on new household loans from January to September last year.
DSR between 40% and 60% accounted for 10.9%, 60% to 80% and 80% to 100% were 3.8% and 1.4%, respectively. Loans exceeding a 100% DSR also accounted for as much as 4.0%.
A financial authority official said, "Loan regulations will be implemented gradually over several years with a grace period," adding, "Especially for young people, regulations will be applied flexibly, such as reflecting expected future income."
The household debt management plan also includes mandatory principal installment repayment. Currently, for unsecured loans, only interest is paid monthly until maturity, but going forward, both principal and interest will be repaid together.
Additionally, the plan includes improvements to the requirements for the Bogeumjari Loan. The Bogeumjari Loan allows borrowing up to 300 million KRW if conditions such as an annual income of 70 million KRW or less (only the individual if unmarried, combined for couples if married) and a housing price of 600 million KRW or less are met.
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