Korea Inclusive Finance Agency to Offer Cash Incentives for Early Repayment of Illegal Private Loan Prevention Loans

Cash Support Equivalent to Interest Rate Reduction Difference
Repayment Incentive Program Implemented

The Korea Inclusive Finance Agency announced on June 9 that it will implement a repayment incentive program, which provides a certain amount of cash to borrowers who fully repay their Illegal Private Loan Prevention Loans (formerly known as Small Living Expense Loans) early, in order to encourage early repayment.

Eligible recipients are those who fully repay the principal and interest of their Illegal Private Loan Prevention Loan after one month from the loan execution date but before the original maturity date. The support amount is equivalent to the difference between the actual interest paid and the interest amount that would have been paid if the next interest rate reduction incentive had been applied.

The repayment incentive will be automatically deposited into the borrower's registered auto-transfer account or loan disbursement account within 30 days of full repayment, without any separate application process. However, this program only applies to loans executed after May 26, when the system was introduced, and is not retroactively applied. Borrowers who repay or are discharged through court personal rehabilitation, the Credit Counseling and Recovery Service's debt adjustment, the agency's special debt adjustment, or bond sales are excluded from eligibility.

The agency is also operating a "Faithful Repayment Interest Rate Incentive Program" to reduce the repayment burden and encourage responsible repayment among users of the Illegal Private Loan Prevention Loan. If borrowers meet the faithful repayment requirements at both the six-month mark after loan execution and at the time of the first maturity extension, the interest rate is reduced by 3.0 percentage points at each point, for a possible total reduction of 6.0 percentage points. Additionally, if the borrower has completed the agency's financial education at the time of loan initiation or is confirmed as a member of the Ministry of Health and Welfare's Welfare Membership, an additional 0.5 percentage point reduction per year is available, making the maximum possible interest rate reduction 6.5 percentage points per year.

Lee Jaeyeon, President of the agency, stated, "We expect this will promote a virtuous cycle of funding and strengthen the sustainability of policy finance."