[Exclusive] Loan Refinancing Service to Be Extended to Individual Business Owner Loans

"Interest Burden on Small Business Owners Expected to Decrease Through Rate Competition"
Expansion from Bank Credit Loans to Secondary Financial Institutions
World's First Refinancing Platform: 'Loan Refinancing Service'
Switching to Loans with an Average Rate 1.53% Lower
Annual Interest Savings of 1.76 Million Won Per Person

The scope of the 'Loan Refinancing Service,' introduced in 2023, is expected to be expanded to include individual business owners as early as October. This is part of President Lee Jaemyung's pledge to promote low-interest refinancing loans, and is anticipated to reduce the interest burden on small business owners through increased rate competition.

On the morning of the 19th, the Financial Services Commission announced at a policy briefing to the National Planning Committee that it would expand the eligibility for the loan refinancing service as a measure to ease the management burden on small business owners. The Financial Services Commission plans to announce detailed measures in the fourth quarter of this year. It is reported that the policy will first be applied to credit loans for individual business owners at banks, and then expanded to secondary financial institutions. The Financial Services Commission analyzed that, as an expected effect, "competition among financial institutions can substantially alleviate various management and financial burdens for small business owners."

The 'Mortgage Refinancing' service through an online, one-stop refinancing infrastructure surpassed 10,000 applicants and approached 1.8 trillion won in application amounts within 15 days of its launch. The photo shows a commercial bank ATM installed in Yongsan-gu, Seoul, on the 25th. Photo by Kang Jinhyung aymsdream@

The loan refinancing service is the world's first refinancing platform. It was created to encourage financial consumers to reduce their interest burden by allowing them to switch to loans with lower interest rates. Previously, due to the lack of an online system between financial institutions, loan repayments could only be made offline. The Financial Services Commission established a system that intermediates and computerizes the repayment process between financial institutions through the Korea Financial Telecommunications and Clearings Institute network, enabling online refinancing. Starting with credit loans in May 2023, the service was expanded in January last year to include apartment mortgage loans and guaranteed jeonse loans of up to 1 billion won. Since the second half of last year, the service scope has been further expanded to include residential officetels and villas (multi-family and row houses) where real-time market price inquiry is available.

The interest reduction effect of loan refinancing has proven to be significant. According to the Financial Services Commission, as of the end of October last year, approximately 290,000 people had refinanced loans totaling 16 trillion won. By switching to loans with an average interest rate 1.53 percentage points lower, each person benefited from an annual interest saving of 1.76 million won.

Meanwhile, President Lee Jaemyung, during his presidential campaign, pledged to expand low-interest refinancing loans as a way to ease the financial burden on small business owners and the self-employed. On the 4th of last month, President Lee announced on his social networking service (SNS) Facebook account that he would prepare a comprehensive plan for COVID-19 loans for small business owners and the self-employed, stating, "We will expand policy funds such as low-interest refinancing loans and interest subsidies, and introduce a customized long-term installment repayment program for small business owners."