Introduction of 10-Year Term Unsecured Loans... Will Household Loans Increase?

Reduced Monthly Principal and Interest Repayment Burden, Increased Total Loan Limit Effect

[Image source=Yonhap News]

[Asia Economy Reporter Sim Nayoung] A 10-year installment repayment credit loan product has been launched in the domestic banking sector. Until now, the maximum maturity for credit loans at commercial banks was 5 years. Extending the maturity reduces borrowers' monthly principal and interest repayment burden. Under the personal total debt service ratio (DSR) regulation, the total loan limit available also increases.

According to the financial sector on the 1st, KB Kookmin Bank extended the loan period (maturity) of installment repayment credit loans from a maximum of 5 years to 10 years starting from the 29th of last month. From the 2nd, KB Kookmin Bank will lower the interest rate of the credit loan product 'KB Jikjangin Deundun Credit Loan' by 0.2 percentage points (p) and 'KB Star Club Credit Loan' by 0.3 percentage points.

The interest rates for mortgage loans (reduced by up to 0.45 percentage points) and jeonse deposit loans (reduced by up to 0.55 percentage points), which were lowered from the 5th of last month, will also be applied until the end of this month.

The interest rate for KB Housing Jeonse Deposit Loan (guaranteed by Korea Housing Finance Corporation) remains at 3.31?4.51%, and for KB Jeonse Security Loan (guaranteed by Housing and Urban Guarantee Corporation) at 3.14?4.34%. The variable interest rate for KB mortgage loans is 3.42?4.92%, and the mixed (fixed) rate is around 4.08?5.58%.

Recently, major commercial banks have extended the maturity of mortgage loans from the existing 33?35 years to 40 years. This, like the extension of credit loan maturities, reduces the principal and interest repayment burden for borrowers and increases the total loan limit available.

The trend of extending maturities for credit and mortgage loans is expected to continue. Due to the impact of rising interest rates, the outstanding balance of household loans at commercial banks has been declining for several months. Accordingly, banks are lowering the loan threshold by extending the installment repayment maturity of loan products.