Shinhan Bank to Waive Early Repayment Penalties on Household Loans for Up to One Year

Relief for Vulnerable Borrowers During Interest Rate Hike
Approximately 124,000 People Expected to Benefit

[Asia Economy Reporter Yu Je-hoon] Shinhan Bank announced on the 16th that starting from the 18th, it will waive the full prepayment penalty for up to one year to alleviate the repayment burden of financial consumers vulnerable to interest rate hikes. This follows the mortgage loan interest deferral program announced in December last year.

The support for prepayment penalty waiver targets customers in the bottom 30% credit rating bracket holding household loans (credit, jeonse deposit loans, mortgage loans) as of the end of last year, who incur prepayment penalties. Shinhan Bank plans to automatically waive the prepayment penalty by verifying eligibility at the time of loan repayment without requiring a separate application from customers.

Shinhan Bank expects about 124,000 customers (with approximately KRW 9.9 trillion in household loans) to benefit from the prepayment penalty waiver implementation.

Previously, at the end of May last year, Shinhan Bank began support measures to ease the principal and interest burden of mortgage loans by extending the loan period by 5 years at the existing interest rate, thereby lowering the monthly principal and interest payments. It has continued support to ease the burden on vulnerable borrowers during the interest rate hike period, including ▲ lowering mortgage loan interest rates exceeding 5% annually ▲ reducing fixed interest rates on jeonse loans for vulnerable borrowers ▲ lowering interest rates by up to 1.5 percentage points for customers holding credit loans exceeding 7% ▲ and reducing new interest rates on Saehopeum Holssi loans.

A Shinhan Bank official said, "We hope that the prepayment penalty waiver will reduce the repayment burden for vulnerable borrowers during the interest rate hike period," adding, "We will continue proactive measures to alleviate customers' financial burdens, from existing support for vulnerable groups to the prepayment penalty waiver."

Meanwhile, the mortgage loan interest deferral program implemented by Shinhan Bank since December last year targets customers holding principal installment mortgage loans with balances of KRW 100 million or more, whose loan base interest rates have risen by 0.5 percentage points or more compared to the end of December 2021. Applicants can defer loan interest for up to 12 months by the difference between the loan base interest rate at the time of application and the base rate at the end of December 2021, up to a maximum of 2.0 percentage points. Deferred interest must be repaid in installments over 36 months after the deferral period ends.

For example, if a loan account with a total interest rate of 6.0% (base rate KOFIX new 3.98% + spread 2.02%) applies for interest deferral in December last year, and the KOFIX new base rate at the end of December 2021 was 1.55%, the base rate difference is 2.43 percentage points (3.98% - 1.55%). In this case, the applicant can defer interest up to 2.0 percentage points of the 2.43% difference, paying interest at a total loan rate of 4.0% for 12 months, and repay the deferred interest (2.0 percentage points) in installments over 36 months after 12 months.