[Exclusive] Government Employee Pension Loans Also Open Run... Q1 Limit Reached in '10 Minutes Cut'

Public Official Pension Loans Join Open Run
No DSR or Other Regulations Applied, Low Interest Rates Boost Popularity
Over 13,000 People Rushed In on the 14th, Causing Site Crashes

[Image source=Yonhap News]

[Asia Economy Reporter Jin-ho Kim] The government employee pension loan has joined the so-called ‘open run’ phenomenon, where the loan limit is exhausted immediately upon release. This surge in demand is due to tighter household loan regulations such as the strengthened Debt Service Ratio (DSR) starting this year, driving borrowers to seek ‘circumvention loans’ that are free from these restrictions. The fact that the low-interest policy mortgage product, the qualified loan, also sold out immediately after resuming sales indicates that the ‘loan cliff’ crisis, where borrowing money is difficult, is spreading comprehensively from the beginning of the year.

According to the financial sector on the 17th, the loan limit for ‘general loans and housing fund loans’ for the first quarter of this year was fully exhausted on the first day of government employee pension loan applications. The total amount was about 80 billion KRW. Applications started at 9 a.m., and sales were reportedly completed in less than 10 minutes.

The ‘social policy loans’ targeted at newlyweds and others, which will begin accepting applications from the 18th of this month, are also expected to be fully exhausted on the same day. The first quarter limit for ‘social policy loans’ is about 120 billion KRW.

Originally, sales of the government employee pension loan for the first quarter of this year began on the 14th. However, more than 13,000 applicants rushed in immediately upon opening, causing the server to crash and sales to be temporarily suspended. Sales resumed over two days, on the 14th and 18th, depending on the loan type. A government employee hoping to get a loan said, “Since the second half of last year, the government employee pension loan has been so popular that the limit is exhausted within about 10 minutes of opening. To get a loan, thorough preparation is essential, and you must be prepared to try multiple times.”

The government employee pension loan is a product secured by the pension that a government employee will receive after retirement. General loans for government employees needing extra funds offer up to 20 million KRW, and loans up to 70 million KRW are available when purchasing or selling a home under 85㎡ in the name of the borrower or spouse. Social policy loans for newlyweds, families with three children, or children’s marriages have a maximum limit of 30 million KRW.

Demand for government employee pension loans has exploded since last year. Its popularity is centered on government employees who need money for home ownership or investment, as it is exempt from strong household loan regulations such as the DSR. From this year, loans from banks or secondary financial institutions are subject to borrower-level DSR regulations, significantly reducing loan limits compared to last year.

It has gained even more attention since the end of last year due to the sharp rise in loan interest rates. The interest rate for government employee pension loans is based on the household loan interest rate announced by the Bank of Korea. For the first quarter of this year, the interest rate is 3.46% for general loans and housing fund loans, and 2.46% for social policy loans. Considering that most bank loan interest rates currently range from 4% to 6%, this clearly offers an interest rate advantage.

Meanwhile, the so-called ‘loan cliff’ phenomenon continues to become more apparent in various places this year as well. The qualified loan, a low-interest policy mortgage product, sold out its first quarter or one-month limit within a day of release, mainly at major banks.