K Bank 2Q Loans to Mid-Low Credit Borrowers Reach 620 Billion Won... Surpasses 1 Trillion Won in H1

Average Interest Rate for Medium-Low Credit Customers at 6.91%
Average Credit Score Rises by 60 Points

[Asia Economy Reporter Minwoo Lee] K-Bank supplied loans exceeding 1 trillion KRW to low- to medium-credit borrowers (KCB credit score 850 or below) in the first half of this year alone.

K-Bank announced on the 26th that it supplied 625.6 billion KRW in low- to medium-credit loans in the second quarter of this year. Accordingly, the total supply of low- to medium-credit loans in the first half reached 1.049 trillion KRW, surpassing last year's total supply of 751 billion KRW in just half a year.

The advancement of the credit scoring system (CSS) model is cited as the reason for the increase in loans. Earlier in February, K-Bank newly developed and applied a specialized credit scoring system (CSS) reflecting the characteristics of low- to medium-credit customers. Subsequently, in March, it implemented two rounds of interest rate reductions across all credit loans, including low- to medium-credit loans.

This enabled an increase in loan approval rates and limits, which was effective. In the second quarter, the average interest rate for low- to medium-credit customers’ credit loans at K-Bank was 6.91% per annum. The lowest interest rate received by a low- to medium-credit customer was 3.07% per annum (at the time of loan issuance). Among customers who received low- to medium-credit loans, the lowest credit score was 415 points.

Customers used K-Bank to repay non-bank loans, reducing interest burdens and improving their credit scores. It was found that 62.7% of K-Bank’s low- to medium-credit loan customers who held non-bank loans repaid those loans.

Considering that the average household loan interest rate at savings banks in June, as announced by the Bank of Korea, was 12.89%, K-Bank users effectively halved their interest burden by repaying existing non-bank loans with K-Bank’s low- to medium-credit loans. Customers who repaid non-bank loans with K-Bank’s low- to medium-credit loans saw their KCB scores increase by an average of 60 points, with some customers’ scores rising as much as 291 points.

As of the end of the second quarter, the proportion of low- to medium-credit loans in K-Bank’s credit loan balance was 24.0%. A K-Bank official stated, "To achieve the year-end target of 25% for the proportion of low- to medium-credit loans, we plan to further advance the CSS model using alternative information and refine our screening strategies. We will continue to do our best to expand benefits for financially marginalized groups, which is the founding purpose of internet banks."