Financial Authorities Launch 'Emergency Financial Rescue' in March... Principal and Interest Reduction for Vulnerable Groups

Shinbokwi Expands 'Special Rapid Debt Adjustment' to All Age Groups

[Asia Economy Reporter Yu Je-hoon] Financial authorities will expand principal and interest reductions for vulnerable groups starting in March and provide emergency living expense loans to vulnerable borrowers as part of an 'emergency financial rescue' effort.

According to authorities on the 20th, the Financial Services Commission will expand the existing ’Rapid Debt Adjustment Special Program,’ which reduces agreed interest by 30-50% for low-credit youth (34 years old and under), to all age groups starting in March. The program targets vulnerable borrowers facing difficulties due to low credit, long-term unemployment or hospitalization, and disaster damage.

This program includes extending the repayment period up to 10 years or deferring repayment for up to 3 years for borrowers with a delinquency period of 30 days or less, or those who have not yet become delinquent, under the Credit Recovery Committee’s rapid debt adjustment (pre-delinquency debt adjustment). The special program further reduces the agreed interest by 30-50% compared to the existing terms.

Authorities expect this program to support vulnerable groups and also help financial companies prevent additional defaults on their held claims. Since the interest rate reduction is carried out with the consent of financial companies when the eligible vulnerable borrowers apply to the Credit Recovery Committee, no government funds are injected.

Additionally, for recipients of basic livelihood security, persons with severe disabilities, and others with insufficient repayment capacity, even if the delinquency period is between 31 and 89 days, full interest and up to 30% of the principal will be reduced. Previously, principal reduction applications were only possible if the delinquency period was 90 days or more.

Financial authorities are also accelerating the ’Emergency Living Expense Loan.’ This system provides loans up to 1 million KRW on the same day without checking delinquency history to vulnerable groups exposed to illegal private loans. The interest rate is set at an annual 15.9%, but can be adjusted down to a minimum of 9.4% for timely repayment.