[Report] First Day of Emergency Living Expense Loans... "Small Amounts, but Putting Out Urgent Fires"

Seoul Sinjeong-dong Yangcheon Community Financial Center Consultation Site
Same-Day Payment After Consultation on Usage and Repayment Plans
"Treated as Defaulters"... Complaints About Small Loans and High Interest Rates

“It’s insufficient, but at least the urgent fire has been put out.”

At around 9:30 a.m. on the 27th, Mr. Kim (27, Hwaggok-dong, Seoul), whom we met at the Yangcheon Low-Income Financial Support Center in Sinjeong-dong, Seoul, sighed with relief after finishing a consultation for a ‘small living expense loan.’ He said, “I applied to pay two months of overdue rent,” adding, “I was looking for places to borrow money and was about to juggle credit cards, so I’m relieved that I got the loan.” He also said, “I have to wait for the screening results to know how much the limit will be and whether I can receive it today, but I hope it comes out as much as possible.”

On the first day of small living expense loan applications, the consultation is being held at the Yangcheon Community Finance Support Center in Sinjeong-dong, Seoul on the 27th. Photo by Kwon Hyunji

Applications for the small living expense loan began that day at 46 Low-Income Financial Support Centers nationwide. The small living expense loan is a system that provides an initial loan of 500,000 KRW and up to 1,000,000 KRW on the same day to low-credit borrowers who have difficulty obtaining loans from formal financial institutions and are at risk of falling victim to illegal private loans. Additional loans are possible with faithful interest payments, and incentives such as a reduction of the annual interest rate to 15.9% are also provided. If the purpose of the funds can be verified, borrowers can receive 1,000,000 KRW even on the initial loan. From the 22nd to the 24th, consultation reservations were accepted via the Low-Income Finance Promotion Agency’s website or by phone (Low-Income Finance Call Center, no area code, 1397), and applications surged to the point that website access was delayed and reservations closed early.

The loan consultation site was crowded with people that day as well. The Yangcheon Support Center originally planned to start consultations at 9:30 a.m., but began 30 minutes earlier due to the waiting line. This center is one of the key centers in Seoul and deployed additional staff to prepare for congestion during the loan period. A total of six counters, including employment and welfare consultation desks, were operated. Applicants disclose the purpose of the loan, complete a repayment plan promising to faithfully pay interest and principal, and then receive the loan funds.

On the 27th, the first day of small living expense loan applications, Yangcheon Community Financial Support Center in Sinjeong-dong, Seoul. Photo by Kwon Hyunji

Users generally expressed regret that the loan amounts were small. A man in his 70s who requested anonymity said, “The initial loan of 500,000 KRW is like pocket money,” and pointed out, “It would be more efficient to lend a larger amount from the start.” He criticized, “Although they say they lend without collateral, they also say that the amount will increase only if repayments are made well, which makes borrowers feel like they are being treated as defaulters, which is disappointing.”

There were also criticisms about the high interest rates. Ms. Kim, a woman in her 40s living in Gyeonggi Province, said, “Although it is a policy financial product and the amount is small, the interest rate is relatively high, but I have no choice because I urgently need hospital bills.” A man in his 20s also said, “The interest rate is high, but since I need a large sum immediately, I have to bear interest costs of 6,000 to 10,000 KRW.”

A Financial Services Commission official explained, “It would be better if the amount were larger, but it was set at 500,000 KRW to lend to as many people as possible,” adding, “If a larger amount is needed, low-credit special guarantee loans or Saessal loans and other low-income financial products can be used.”

There were some confusions big and small. Since consultations were conducted only for those with reservations, many people left empty-handed. There were also criticisms about insufficient guidance on required documents. A man in his 20s said, “I inquired before coming, but they said no notice had been issued, so I arbitrarily prepared receipts for rent payments and came.” A man in his 40s also said, “I wish they had informed me in advance about the necessary documents.”