[Song Seungseop's Financial Light] Haetsallon, Can You Only Receive It Once in a Lifetime?

Finance is difficult. It is filled with confusing terms and complex backstories intertwined. Sometimes, you need to learn dozens of concepts just to understand a single word. Yet, finance is important. To understand the philosophy of fund management and consistently follow the flow of money, basic financial knowledge must be the foundation. Therefore, Asia Economy selects one financial issue every week and explains it in very simple terms. Even if you know nothing about finance, we light the ‘fire’ of financial understanding with ‘light’ stories that you can immediately grasp.

Representative policy financial products such as Saessal Loan Bank. Photo by Korea Inclusive Finance Agency.

[Asia Economy Reporter Song Seungseop] The government and financial authorities help vulnerable groups with low income or credit to borrow money cheaply. They do this by setting low interest rates or by the state providing guarantees on their behalf. These products are called ‘policy finance’ products, such as ‘Haetsal Loan 15’ and ‘Safety Net Loan.’ However, many people believe that each policy finance product can only be used once in a lifetime. Is that really true?

To get straight to the point, it depends on the product and the situation. Not all policy finance products prohibit additional or overlapping loans.

‘Haetsal Loan Bank’ is a bridge financial product that helps low-income and low-credit individuals who have used policy financial products to settle in the banking sector by improving their debt or credit. The loan limit is 20 million KRW, and within this limit, one additional loan is possible. However, if you are already using a guarantee product from the Korea Inclusive Finance Agency, the amount used for the guarantee may be deducted, making additional loans difficult.

Is it possible to switch from Bank A’s Haetsal Loan Bank to Bank B’s if the conditions are better? In principle, refinancing Haetsal Loan Bank is difficult. Once Haetsal Loan Bank is executed, additional loans within the maximum limit are only possible at that bank. You must fully repay the amount borrowed from Bank A’s Haetsal Loan Bank before applying for Bank B’s Haetsal Loan Bank.

Not all products allow additional or overlapping loans. ‘Haetsal Loan Youth,’ created to eliminate financial difficulties for college students and young people, is funded by lottery proceeds. It grants a limit of 12 million KRW only once to the same person. For example, if you initially used a 3 million KRW guarantee, the maximum limit afterward is reduced to 9 million KRW. If you have borrowed 12 million KRW, even if you repay it all later, you cannot use it again. Therefore, if you use Haetsal Loan Youth, you should carefully consider whether the funds are currently necessary.

Varies by product and situation... Carefully check whether additional or overlapping loans are allowed

What about high-interest alternative funds? High-interest alternative funds are low-income financial products that can be used instead of high-interest loans. Haetsal Loan 15 and Safety Net Loan II are representative examples. Haetsal Loan 15 is a product that lends money to the lowest credit borrowers who would otherwise have to use loan sharks or illegal private loans, provided they meet minimum criteria. Safety Net Loan II is a refinancing product with interest rates of 17-19% for those who had loans exceeding 20% interest before the legal maximum interest rate reduction date (July 7, 2021).

Both products can be used simultaneously with other low-income financial products. Haetsal Loan 15 can be applied for if you meet the eligibility requirements, even if you have received Sae Hope Holssi, Haetsal Loan, Miso Finance, Change Dream Loan, or Safety Net Loan. Safety Net Loan II can also be supported concurrently with Sae Hope Holssi, Haetsal Loan 15, Worker Haetsal Loan, and other low-income financial products.

There are differences as well. Safety Net Loan II does not allow additional loans while in use. You must fully repay the existing Safety Net Loan II before borrowing again.

On the other hand, if you need an additional loan while repaying Haetsal Loan 15, you can get one more loan within the maximum limit. If you want to take an additional Haetsal Loan 15, you must do so at the bank where you are currently repaying the loan. Individuals can have loans in up to two accounts. If you fully repay one of the existing loans, you can get an additional loan once within the maximum limit. If you have fully repaid all existing loans, you can repeatedly use the product without limit on the number of times, and there is no restriction on the bank where you apply.

For users of the Small Loan Support System for Good Repayers, whether additional loans are allowed varies by institution. Small loans can be obtained from Korea Asset Management Corporation (KAMCO), Miso Finance Central Foundation, and the Korea Credit Guarantee Foundation. KAMCO borrowers cannot get additional loans from the Credit Recovery Committee’s Small Loan Support. Borrowers from Miso Finance Central Foundation and Korea Credit Guarantee Foundation have their loan eligibility and amounts determined considering the amount previously borrowed.