Shinbokwi Implements Security Measures for Credit Recovery Support System: "Single Debtors Also Eligible for Debt Adjustment"

[Asia Economy Reporter Song Seung-seop] The Credit Recovery Committee will strengthen rapid rehabilitation support for short-term delinquents starting from the 27th and temporarily expand support for self-employed individuals affected by COVID-19.

On the 26th, the Credit Recovery Committee announced the implementation of the 'Credit Recovery Support System Enhancement Plan.' This plan was announced by the Financial Services Commission on September 16 to assist small and medium-sized enterprises and small business owners affected by COVID-19. Although the loan maturity extension and interest repayment deferral policies were extended by an additional six months, the purpose is to support individual business owners and debtors facing difficulties due to reasons such as business closure.

According to the plan, debtors with only one debt can receive pre-delinquency (rapid) and interest rate (preliminary) debt adjustments regardless of the delinquency period. Previously, benefits were only available to multiple debtors who owed money to two or more financial institutions if the delinquency period was less than three months.

The benefit of the adjusted interest rate available during preliminary debt adjustment will also increase. Previously, the interest rate adjustment range was 5-10%. However, to alleviate the debt repayment burden, the upper and lower interest rate limits were adjusted to 8% and 3.25%, respectively. For example, if a debtor had a loan with a 20% interest rate and previously received a reduction to 10%, from the 27th, it will be possible to reduce it to 8%.

Additionally, the preliminary debt adjustment system, which uniformly cut the agreed interest rate by 50%, will be adjusted to a range of 30-70% based on the debtor's repayment capacity to provide more reasonable support. However, for special cases such as basic livelihood security recipients, persons with disabilities, elderly people aged 70 or older, university students, and unemployed youth, the reduction rate will be increased from a uniform 65% cut to 70%. The target group will also include the lower-income class and single-parent families.

Incentives for those who make faithful repayments after debt adjustment will also increase. For each year of faithful repayment, the initially adjusted interest rate will be reduced by 10% annually for four years. Currently, a 20% reduction is given after two years of faithful repayment, and an additional 20% reduction is applied after four years of faithful repayment.

Support for self-employed individuals affected by COVID-19 will also be temporarily expanded until 2022. Self-employed individuals who applied for preliminary debt adjustment due to COVID-19 will receive an additional 10 percentage point reduction within a maximum of 70% of the agreed interest rate. Furthermore, loans for living and operating expenses for self-employed individuals are excluded from debt adjustments occurring within six months to ease application conditions.