"Interest Rates Are Dropping. Switch Loans in Just 10 Minutes"… One-Stop Debt Refinancing Starts on the 31st

Toss, Finda, Naver Financial, Kakao Pay, Bank Salad
Among Commercial Banks, Shinhan Bank Launches Service First

[Image source=Yonhap News]

"Interest rates are falling, so this is the time to switch to a cheaper option." Seonghee Lee (37), an office worker, took out a 30 million KRW unsecured loan at an interest rate of 5.3% ten months ago. "The period for paying early repayment fees has passed, and since interest rates have been dropping lately, I was thinking about what to do. I plan to try the refinancing loan platform launching at the end of this month," she said.

Complex refinancing now possible in 10 minutes via app

Starting from the 31st, a one-stop refinancing loan service will begin. The service will be provided by Toss, Finda, Naver Financial, KakaoPay, BankSalad?who have been offering existing loan interest rate comparison services?and Shinhan Bank among commercial banks. The key is to go beyond just comparing existing interest rates and allow users to select a cheaper product from another bank and switch immediately on the spot.

A Financial Services Commission official said, "Until now, consumers had to visit banks in person and deal with complicated paperwork to refinance loans, but from now on, after comparing interest rates on the refinancing loan platform, users can complete the refinancing online within 10 minutes." He added, "Competition among banks on interest rates will also intensify."

If users of the loan comparison platform agree to the MyData service, the platform shows their existing loan list. Users select the loan products they want to compare interest rates for, then input additional information such as occupation, annual income, and assets. Partner financial institutions then present new loan limits and interest rates to the users, completing the process.

Going forward, when users select the best new loan product offered by commercial banks, savings banks, card companies, or capital companies, the screen immediately switches to the loan app of the selected financial institution. Once loan approval is obtained there, refinancing is executed immediately through the Korea Financial Telecommunications & Clearings Institute.

For example, suppose a person named Hong Gil-dong originally borrowed money from Savings Bank A and wants to switch to Commercial Bank B with a lower interest rate. After receiving Hong Gil-dong’s refinancing loan application, Commercial Bank B repays Hong Gil-dong’s loan at Savings Bank A through the Korea Financial Telecommunications & Clearings Institute. Then, Commercial Bank B converts Hong Gil-dong’s loan into a new loan, and Hong Gil-dong repays Commercial Bank B.

From the 31st, Naver Financial, KakaoPay, Toss, Finda, and BankSalad will update their existing apps to provide refinancing loan services. Shinhan Bank plans to add refinancing loan service features to its dedicated app, SOL.

Commercial banks create exclusive products; limited product offerings on platforms
Savings banks unable to lower loan interest rates

There are also limitations. Financial institutions participating in the refinancing loan platform do not include all their financial products, making it difficult to secure product diversity. Commercial banks are creating exclusive products specifically for refinancing loans. A commercial bank official said, "There were concerns that with the launch of refinancing loan services, banks would be reduced to mere product providers to big tech companies and become dependent, so we had opposed it until now. However, since we cannot just lose existing customers, we will offer exclusive products with interest rates 0.2 to 3 percentage points lower than existing products and observe the response."

For savings banks, the situation is that they cannot actively engage in loan sales. Savings banks posted losses in the first quarter due to excessively high deposit interest rates at the end of last year. A savings bank official said, "We raise loan funds through deposits, but deposit interest rates are high, and lowering loan interest rates results in losses, so it is currently impossible to lower loan interest rates to increase sales." He added, "The role savings banks can play on the refinancing loan platform will be limited for the time being."

A loan comparison platform official said, "Including commercial banks, regional banks, internet banks, card companies, and capital companies, the number of financial institutions participating in the service is in the dozens, and the number of products from refinancing loan partners will be adjusted until just before launch." He added, "Whoever secures more partners and products will determine success or failure." The Financial Services Commission plans to first apply the refinancing loan platform to unsecured loans and expand the service to mortgage loans by the end of this year.