Finda: High-Credit Borrowers Shift to Secondary Financial Institutions
Loan Agreements for Scores Above 900 Rise by 40%
As the government announced the strengthening of the Phase 3 Debt Service Ratio (DSR) regulations, making it more difficult to obtain loans from banks, it was found that high-credit borrowers with credit scores of 900 or above have turned their attention to secondary financial institutions, which generally offer higher loan limits.
According to an analysis released on June 12 by the fintech (finance + technology) company Finda, the number of loan agreements made by high-credit borrowers with scores above 900 at secondary financial institutions increased by 40.4% in the third week of May (May 19-25) compared to the second week (May 12-18). A loan agreement refers to cases where a loan contract is actually signed.
During this period, the number of credit limit inquiries by high-credit borrowers at secondary financial institutions increased by 16.1%. This rate was more than double the increase seen among mid- and low-credit borrowers (with credit scores in the 400-700 range), whose credit limit inquiries rose by 6.2%.
Among secondary financial institutions, the number and amount of loan agreements by high-credit borrowers in the insurance sector increased by 100% and 117%, respectively. Credit limit inquiries rose the most in the credit card sector, with a 31% increase.
In contrast, among primary financial institutions, only credit limit inquiries increased by 7.5%, while both the number of loan agreements (-0.9%) and the total loan amount (-8.1%) decreased.
Finda analyzed that this was the result of banks raising their lending thresholds in anticipation of tighter loan regulations. The Financial Services Commission announced on May 20 that it would implement the Phase 3 stress DSR as scheduled from July 1.
Expecting an increase in consumers seeking to obtain loans before the regulations take effect, some banks raised interest rates and tightened lending standards to manage their household loan balances. As a result, even high-credit borrowers who would typically obtain loans from primary financial institutions turned to secondary financial institutions.
Meanwhile, during this period, mid- and low-credit borrowers saw an increase in both the number and amount of loan agreements at primary financial institutions, rather than at secondary financial institutions.
A Finda representative stated, "This trend reflects a break from the fixed notion that users only take out loans according to their credit scores, and instead shows a growing tendency to establish personalized strategies and switch to better loan options." The representative added, "Once the Phase 3 stress DSR is implemented, the importance of loan limits will increase alongside interest rates, making strategic decision-making by consumers even more critical."
Based on this analysis, Finda plans to provide a variety of loan analysis services and customized financial information in the future to help users make clear and rational decisions regarding loans.
Lee Hyemin, co-CEO of Finda, said, "Amid growing uncertainty due to regulatory changes, it is more important than ever to provide consumers with accurate information and personalized services to help them make better decisions." She added, "We aim to establish ourselves as a financial platform that enables users to check optimal loan conditions in advance and make wise decisions."
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