Small Livelihood Loans Renamed as 'Illegal Private Loan Prevention Loans'

Financial Services Commission Implements Policy Improvements
Annual Supply Scale Increased to 200 Billion KRW
Initial Loan Limit Raised from 500,000 to 1,000,000 KRW

The Financial Services Commission announced that it will change the name of the small living expense loan to ‘Illegal Private Loan Prevention Loan’ to clearly convey the policy objective of preventing illegal private loans. The name change will apply to new first-time loans and re-loan users from the 31st onward.

The supply scale will also be expanded from 100 billion KRW last year to 200 billion KRW this year. For non-delinquent borrowers in the financial sector, the initial loan limit will be raised from the basic 500,000 KRW to 1,000,000 KRW. Delinquents can still borrow up to 1,000,000 KRW by verifying the purpose of funds such as medical, housing, and education expenses. From the 31st, loan applications within the increased loan limit can be made by visiting the Integrated Support Center for Low-Income Finance, and the increase of loan limits through the ‘Seomin Geumyung Itda’ application (app) is scheduled to be implemented in April.

In March 2023, the Financial Services Commission launched the small living expense loan to absorb the loan demand of vulnerable groups who are easily exposed to illegal private loans into policy low-income finance. As of last month, 251,657 people have been supported with 207.9 billion KRW. Among users, those with credit scores in the bottom 10% or lower (92.4%) and other occupational groups such as daily workers, unemployed, students, and special employment workers (69%) constitute the majority, and existing financial sector loan delinquents (31.6%) also use the service, contributing to alleviating financial difficulties of low-credit vulnerable borrowers.

However, reflecting field opinions that the initial loan limit of 500,000 KRW was somewhat small and could make borrowers vulnerable to the temptation of illegal private loans in urgent living expense situations, the system has been improved.

The Financial Services Commission stated, “We will continue to strengthen policy low-income finance support to alleviate financial difficulties of low-income and vulnerable groups and take necessary measures such as strengthening linkage with the private financial sector.”