[Real Estate Finance] 'Interest Rate Shopping'... Full-Scale Switching of Loans and Deposits

#Office worker Yuseunghwan (37) found himself in a difficult situation after taking out a card loan due to urgent financial needs. He chose the loan that would be deposited the fastest, intending to repay it quickly, but as things went awry, he ended up having to pay mid-10% interest rates, which became hard to manage. To ease the interest burden, Yuseunghwan turned to the loan brokerage and management platform ‘Finda.’ Fortunately, with a high credit score, he was able to switch to a 4% interest rate loan from a commercial bank. As the era of high interest rates arrives, interest rate shopping?aimed at earning even a penny more or paying even a penny less in interest?is gaining attention.

Activation of Refinancing Platforms

According to Finda, the loan brokerage platform with the largest number of partnered financial institutions in the industry, customers who refinanced from secondary financial institutions to primary financial institutions by last month lowered their interest rates by an average of 2.34 percentage points and increased their loan limits by an average of 850,000 KRW (based on one-to-one refinancing). Going forward, the scope of such ‘loan switching’ is expected to broaden and become more active. This follows the financial authorities’ announcement to establish a refinancing loan system by May that allows users to compare credit loan interest rates and limits from banks, savings banks, card companies, and capital companies at a glance and switch loans in a one-stop process.

With the authorities taking a proactive role, financial consumers will soon be able to easily compare interest rates that previously required considerable effort. Competition among financial institutions to attract customers through interest rate offers is also expected to intensify. The refinancing loan system being built by the Financial Services Commission will include 53 financial companies (19 banks, 18 savings banks, 7 card companies, and 9 capital companies) that currently hold 90% of the total credit loan market, as well as 23 platforms (fintech, big tech, and financial companies) that account for 95% of the loan comparison market.

Additionally, the Financial Services Commission plans to enable consumers to accurately check prepayment penalties and repayment feasibility on refinancing loan platforms. Currently, consumers can only verify partial information such as principal and interest of existing loans through loan comparison platforms. However, once the new system is implemented, consumers will be able to assess prepayment penalties and repayment feasibility in advance through information provided by financial institutions before applying for refinancing.

By December, the refinancing service will expand to include mortgage loans. Since mortgage refinancing requires time-consuming processes such as title transfer, a pilot service for credit loan refinancing will be launched in May, followed by expansion to mortgage loans within the year. Compared to small credit loans, mortgage loans have longer terms and larger amounts, so demand for switching is expected to be much higher.

Platforms Targeting Busy Eotteok (Savings + Investment) Enthusiasts

As interest rates have stalled?such as fixed deposits, which once approached 5%, now hovering in the mid-3% range?eotteok (savings + investment) enthusiasts have become more active. Recently, they have been focusing on short-term deposit products. Unlike fixed deposits that typically mature in one year, these products allow subscriptions in units as short as one month or even one day. Products like the Industrial Bank of Korea’s ‘KDB Fixed Deposit,’ Kakao Bank’s ‘Fixed Deposit,’ and K Bank’s ‘CodeK Fixed Deposit’ allow subscriptions starting from a minimum of one month. Even with a one-month term, interest rates in the mid-3% range can be enjoyed.

Going forward, eotteok enthusiasts who move according to interest rates will be able to compare, receive recommendations, and subscribe to deposit and savings products through dedicated platforms. Last year, the Financial Services Commission designated deposit product brokerage services from nine companies?including BankSalad, NHN Payco, Zoom Internet, Gitple, Fink, Viva Republica, Naver Financial, CB Financial, and Shinhan Bank?as innovative financial services. From June, these companies will enable users to compare deposit and savings products from multiple partnered financial institutions at a glance. In addition to interest rate comparisons, they will provide personalized product recommendations through ‘MyData.’ Users will also be able to complete subscriptions in a one-stop process on these brokerage platforms.

Thus, financial consumers will be able to easily search for and subscribe to products that meet their desired conditions. The switching activity among eotteok enthusiasts, who previously compared products and moved through word-of-mouth in investment communities, is expected to become even more active.