[Report] First Day of 1.5% Bank Loans "Rejected Due to Installment Car... Can I Get It This Time?"

Commercial Banks Start Supplying Ultra-Low Interest Loans... Corporate and NongHyup Banks Advantageous for Low Credit Ratings

A bank loan product was launched on the 1st for small business owners affected by the spread of the novel coronavirus (COVID-19). On the 31st, the Financial Services Commission and the Korea Federation of Banks announced that they will accept applications for a fixed interest rate credit loan of 1.5% per annum with a maturity of one year from tomorrow until the end of 2020. The loan limit is up to 30 million KRW. This product targets small business owners with annual sales of 500 million KRW or less who have high credit ratings. The borrower's credit rating must correspond to levels 1 to 3. The photo shows a counter at a commercial bank in Seoul on the day. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporters Haeyoung Kwon and Minyoung Kim] "I heard that if your credit rating is below grade 3, you can't get the ultra-low interest loan at 1%. But Industrial Bank of Korea (IBK) told me that even with low credit, I can get a loan, so I'm planning to hurry to the IBK branch."

At 9 a.m. on the 1st, at a commercial bank's Namdaemun branch. Yoonja Choi (65, pseudonym), in her 60s, who runs an accessory shop in Namdaemun Samik Fashion Tower, visited the branch even before it opened. She had heard that an ultra-low interest credit loan with an annual rate of 1.5% and a limit of 30 million KRW was being launched. However, she was told by the branch staff that her credit rating did not meet the bank's standard (grades 1 to 3), so she was advised to check with IBK, which offers loans for grades 1 to 6. She quickly headed to a nearby IBK branch. Having run her shop in the same place for 20 years, the 'Namdaemun native' Ms. Choi said, "I need to earn 400,000 to 500,000 KRW daily, but yesterday's sales increased by only 10,000 KRW," adding, "Since I heard I can get a bank loan at 1% interest, I need to hurry to a nearby bank."

The first day that small and medium-sized enterprises and small business owners affected by the novel coronavirus disease (COVID-19) could receive ultra-low interest loans at 1.5% from commercial banks. The bank counters in major commercial districts in Seoul were quieter than expected. Although self-employed people continued to visit bank branches near Namdaemun Market and Myeongdong Station to apply for ultra-low interest loans, the hundreds of meters-long queues that used to form in front of the Regional Credit Guarantee Foundation and the Small Enterprise and Market Service were nowhere to be seen. It was the first day, so promotion was still insufficient, and the morning hours contributed to the low crowd, but loan consultations continued steadily.

A representative from the commercial bank's Namdaemun branch said, "Since the spread of COVID-19, loan inquiries from small-scale self-employed people engaged mainly in accessory and clothing wholesale and retail businesses have increased significantly," adding, "While the number of loan consultations at the branch used to be only one per day, it surged to 10 per day since last week."

On the 1st, a small business owner affected by the spread of the novel coronavirus (COVID-19) is receiving loan consultation at a commercial bank in Seoul, where a bank loan product was launched for small business owners impacted by the pandemic. Photo by Hyunmin Kim kimhyun81@

IBK, which provides loans to small business owners with credit ratings from 1 to 6 and has a relatively low threshold for bank access, saw even more people coming for consultations. Around 9:30 a.m. that day, two men in their 30s were consulting about loans at the Myeongdong Station branch. The branch was busy responding to numerous phone inquiries about COVID-19 loans, including questions about required documents, credit ratings, and additional loans.

Junsang Kang (39, pseudonym), whom we met at the IBK Myeongdong Station branch, said, "Sales have been severely hit as Chinese and Southeast Asian tourists have completely stopped visiting Myeongdong," adding, "Due to reduced sales from COVID-19 and the burden of labor costs, I have been sending one employee home after lunch." Kang has been running a Chinese restaurant nearby for five years. He lamented that although he had experienced the Middle East Respiratory Syndrome (MERS) and the Terminal High Altitude Area Defense (THAAD) crisis, sales have never dropped as much as they have recently.

Woonsik Song (55, pseudonym), who runs a bakery in Seongnam, Gyeonggi Province, said, "I went to the bank in February to get a COVID loan but was rejected because I had an installment car loan. This afternoon, I plan to visit IBK for ultra-low interest loan consultation." He had received a loan recommendation letter from the Small Enterprise and Market Service but was rejected by his main bank because he had purchased an installment car through a secondary financial institution. Mr. Song said, "I needed a car to buy raw materials like flour, but I was told my credit was not good because I used a capital company," adding, "If I get a guarantee from the Regional Credit Guarantee Foundation, the interest rate goes up due to the guarantee fee, so I really hope to get a loan at an interest rate in the 1% range this time."

The ultra-low interest loan support targets small business owners with annual sales under 500 million KRW and credit ratings from 1 to 3. IBK offers loans to those with credit ratings from 1 to 6, and NongHyup Bank provides loans up to grade 5 borrowers, making their support relatively broader. The loan execution period is also fast, ranging from 3 to 5 days. Shinhan Bank and KB Kookmin Bank allow loans to be obtained non-face-to-face with only a public certificate. It is not possible to apply for other ultra-low interest loan products simultaneously.

A financial industry official advised, "Small business owners with relatively low credit ratings should visit IBK or NongHyup Bank," adding, "The time to get a loan is shorter than with guarantee institution loans, and the interest rates are lower, so you should hurry before the loan limit is exhausted."

This content was produced with the assistance of AI translation services.