Government-Backed Repayment of Saet Sal Loan Tripled in 2 Years

January 2021 6.1% → November 2022 16.3%
Choi Seungjae: "Reducing Saessal Loan Leads to Illegal Private Loans... Need to Enhance Planning"

[Asia Economy Reporter Kwon Hyun-ji] The proportion of customers using the low-income loan product, Haetsal Loan, who failed to repay their loans and had the government repay on their behalf has nearly tripled in the past two years. This has raised concerns about the warning signs of household debt defaults amid high interest rates.

According to data submitted by the Korea Inclusive Finance Agency to Choi Seung-jae, a member of the National Assembly's Political Affairs Committee from the People Power Party, as of November last year, the subrogation repayment rate for Haetsal Loan 15 and Haetsal Loan 17 was recorded at 16.3%. This figure was 6.1% in January 2021, nearly tripling over two years. The number of subrogation cases also increased from 2,000 in January 2021 to 4,000 in November 2022, and the amount rose from 13.8 billion KRW to 24.1 billion KRW.

The Korea Inclusive Finance Agency operates Haetsal Loan, which guarantees loans at an annual interest rate of 15.9% to prevent low-credit and low-income borrowers from falling into illegal private loans. If borrowers fail to repay on time, the agency performs subrogation repayment by paying the bank on behalf of the borrower according to the guarantee ratio.

Notably, the increase among medium-credit borrowers was remarkable. For borrowers with credit scores between 701 and 800, the subrogation repayment rate rose from 2.5% in January 2021 to 18.4% in November 2022, and for those with scores between 801 and 900, it increased from 1.1% to 15.2% during the same period. The fact that these groups showed a higher growth rate than low-credit borrowers suggests that the risk of household debt is increasing.

Assemblyman Choi pointed out, “Reducing loans for medium- and low-credit borrowers simply because the Haetsal Loan subrogation repayment rate is surging could push them into illegal private loans, so highly tailored targeted support policies are necessary.”