Private Lending Advisory: "Check for Official Registration and Keep the Contract"

As the Economy Worsens, More People Turn to Private Lenders
Avoid Illegal Lenders and Check the Maximum Interest Rate (20%)

On May 27, the Financial Supervisory Service stated that as the economy becomes more challenging, the number of people using private lending services is increasing. The agency warned that this could lead to greater consumer harm and urged caution. It also released a list of important points that users of private lenders should always check.

First, when in need of a small amount of money or emergency funds, it is advisable to check with the Korea Inclusive Finance Agency to see if you are eligible for government-supported financial products. The agency recommends exploring government-backed financial products before turning to private lenders, even in urgent situations.

If you do decide to use a private lender, you must confirm that the lender is officially registered before proceeding with any loan consultation. Using illegal (unregistered) lenders can result in various types of harm, such as being charged excessively high interest rates, illegal debt collection practices, and the leakage of personal information. Verifying the legitimacy of the lender is considered the minimum safeguard to prevent consumer harm.

It is also important to be aware that any loan interest rate exceeding the legal maximum (20% per annum) is invalid, and the additional interest rate charged for late payments cannot exceed 3% per annum. In particular, it is illegal for loan brokers to demand brokerage fees from borrowers in exchange for arranging a loan, so such requests should not be accepted.

You should thoroughly check key loan conditions in advance, such as the interest rate, repayment method, and penalties for late payments, and receive all relevant documents, including the contract. In particular, the loan contract is an important piece of evidence in the event of a legal dispute or when seeking relief from damages, so it must be kept to protect your rights. The agency emphasized that if you do suffer harm, you should immediately report it to the Financial Supervisory Service and the police, and seek assistance through systems such as the debtor representative program.