Kabang, Special 4% Credit Loan... Inbank Raising Mid-Low Credit Loans

[Asia Economy Reporters Buaeri Kwon and Hyunji Kwon] Following the suspension of loans to high-credit borrowers, KakaoBank is accelerating efforts to boost loans to middle- and low-credit borrowers by launching a special low-interest loan promotion. With the year-end approaching, the three internet banks (KakaoBank, K Bank, and Toss Bank) are striving to meet their middle- and low-credit loan targets.

On the 21st, KakaoBank announced that it will offer a special sale of its "Mid-Credit Loan Product" with a minimum interest rate of 4.45% and a maximum limit of 100 million KRW until the end of this month. The sales limit is 200 billion KRW. KakaoBank’s mid-credit loans target customers with credit scores in the lower 50% (850 points or below according to KCB), an annual income of at least 20 million KRW, and a minimum employment period of one year.

The loan interest rate is lowered by 1.98 percentage points to a minimum of 4.45%, which KakaoBank says is the lowest in the industry. The loan term is up to 10 years with equal principal and interest installment repayment, and all KakaoBank loan products waive prepayment penalties. KakaoBank will support the first month’s interest for middle- and low-credit customers who newly execute loans by the end of this month.

KakaoBank’s move to launch a special loan promotion is driven by its commitment to meet the year-end target for the proportion of middle- and low-credit borrowers, as agreed with financial authorities. Previously, KakaoBank temporarily suspended new credit loans to high-credit borrowers until the end of this month. From today until the 31st, new applications for credit loan products excluding mid-credit loans, mid-credit plus loans, and Sunshine Loan 15 will be restricted. As of the third quarter, the proportion of credit loans to middle- and low-credit borrowers (based on outstanding balance) at KakaoBank stands at about 23.2%. KakaoBank has set a target of 25% by the end of this year.

Last year, all three internet banks failed to meet their middle- and low-credit borrower ratio targets, but this year the goal is within reach. K Bank and Toss Bank are also intensifying efforts to expand their middle- and low-credit loan portfolios. K Bank’s cumulative loans to middle- and low-credit borrowers in the third quarter reached 1.5992 trillion KRW, more than double last year’s total of 751 billion KRW. Toss Bank supplied household loans for middle- and low-credit customers amounting to 2.7 trillion KRW as of last month. As of the third quarter, the proportion of middle- and low-credit loans at K Bank and Toss Bank stands at 24.7% and 39%, respectively, with targets of 25% and 42% set for this year.

However, K Bank and Toss Bank have not planned to suspend loans to high-credit borrowers. A K Bank official said, "We expect to smoothly achieve the year-end target." A Toss Bank official stated, "We have already achieved a 40% share of loans to middle- and low-credit borrowers as of last month."