Should I Switch to Low-Interest Loans... Banks Waive Prepayment Fees for Vulnerable Borrowers

Hana from 26th · KB Kookmin effective from 10th next month
Targeting KCB lower 30~50% · 5th grade or below

[Asia Economy Reporter Kwon Hyun-ji] Commercial banks are planning to waive prepayment penalties for low-credit borrowers. This is expected to ease the interest burden on low-income and vulnerable groups during the period of rising interest rates.

Hana Bank announced on the 24th that it will waive prepayment penalties for one year starting from the 26th. The prepayment penalty is a fee charged by banks to borrowers who repay their loans earlier than the maturity date, and by eliminating this fee, the bank aims to reduce the financial burden on low-income and vulnerable groups. The target borrowers are those in the bottom 50% of the KCB credit score as of the end of the month prior to the repayment date, and this applies to household loan products. The bank will automatically verify and apply the waiver without a separate application.

KB Kookmin Bank plans to waive prepayment penalties on household loans for borrowers with a credit rating of grade 5 or lower from credit rating agencies starting from the 10th of next month.

Woori Bank has also been waiving prepayment penalties for low-credit borrowers in credit grade 5 or below since the 2nd. Additionally, it extended the period during which prepayment penalties on household loans can be waived from one month before the loan maturity to three months before, thereby expanding the scope of the waiver. Shinhan Bank also began waiving prepayment penalties on household loans for borrowers in the bottom 30% credit rating group starting from the 18th.

As a result, low-credit borrowers are expected to find it easier to switch to low-interest refinancing products such as the Bogeumjari Loan.

These banks agreed at the end of last year to temporarily waive prepayment penalties for vulnerable borrowers for one year starting this year. This is a follow-up measure to the household debt relief policy promoted by financial authorities. Most banks expanded the scope of the waiver beyond the government and ruling party’s recommendation (bottom 30% credit rating, KCB grade 7 or lower).