The loan rate ceiling will be lowered to 20% from July

South Korea’s maximum statutory interest rate that private lenders can charge customers will be lowered to 20% per annum from July, the country’s main financial regulator said on Tuesday.

A revised enforcement order to reduce the maximum loan rate suggested by the Financial Services Commission in November was approved at a cabinet meeting earlier today, officials said in a statement.

This decision aims to ease the burden of interest rates for debtors in difficulty. Currently, private lenders can impose a maximum interest rate of 24% per year by law, but the cap has often been ignored in the market, an FSC official said.

Under the new measure, nearly 87% of the 2.39 million borrowers across the country – charged at an interest rate of 20% per annum or more – can expect debt reduction of nearly 483 billion won ($ 436 million) each year, according to data shown.

The authority will enact the revised ordinance on April 6, and the change will take effect on July 7 after a three-month grace period.

In single payment loans, it is possible to get cash quickly without worrying about making timely payments every month. But while they are convenient and easy to arrange, these loans should not be used for all financial hardship. Like other loans, they can also cause more problems in your finances if you don’t use them properly. Before taking out a single payment loan, make sure that you are prepared to make the repayment on the due date.

The latest rate cut, however, has raised concerns that first- and second-tier banks are likely to tighten up their credit assessment processes for low-income households or reduce the total volume of loans they are making. ‘they agree, industry sources said.

In response, the FSC pledged to introduce follow-up measures as early as April to increase the amount of government guaranteed loans, including the so-called “sun loans” put in place in 2010 to help borrowers earning less than $ 30. million dollars a year and those with low credit scores.

In addition, the authority plans to launch low-rate policy loan programs in which debtors can transfer their current credit loans at high interest rates of over 20%, while setting up a group of whole-of-government work designed to tackle illegal private finance operations. as well as to ban illegal advertising, officials said.

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