[Q&A] Who Are Eligible for Personal Debtor Repayment Deferral and Which Agencies Handle Applications?

[Asia Economy Reporter Kim Hyo-jin] On the 8th, financial authorities decided to defer the principal repayment of debts for individual debtors at risk of default due to the impact of the novel coronavirus disease (COVID-19) for up to one year.

This is an expansion of the 'Pre-Workout Program' to prevent household loan borrowers from becoming financial defaulters due to unpaid leave or other circumstances caused by COVID-19.

This measure was included in the 'Strengthening Support Measures for Vulnerable Individual Debtors Affected by COVID-19,' discussed at the 4th Emergency Economic Meeting chaired by President Moon Jae-in on the same day.

Below is a Q&A explanation from the Financial Services Commission regarding this measure.

▲ Are all individual debtors eligible for support?

= Only vulnerable individual debtors facing the risk of default due to income reduction are eligible. A separate review will be conducted to determine whether debt repayment is difficult, such as when monthly income after deducting household living expenses is less than the monthly debt repayment amount.

▲ Which institution should individual debtors apply to for principal repayment deferral according to their situation?

= For guaranteed policy microfinance loans such as Worker’s Sunshine Loan, Sunshine Loan 17, Sunshine Loan Youth, Change Dream Loan, and Safety Net Loan, applications can be made to the financial institution that provided the loan. If there is only one household credit loan for which deferral is desired, application can be made to the lending financial institution. If there are two or more credit loans, applications should be made to the Credit Counseling and Recovery Service.

▲ What are the advantages and disadvantages of using the repayment deferral program?

= It is preferable to prevent delinquency by using the pre-workout or debt adjustment programs offered by each financial company or the Credit Counseling and Recovery Service rather than leaving the delinquency unattended. However, in such cases, additional new loans or credit card usage may be restricted, so it is advisable to repay according to the original schedule if possible.

▲ What if there is no time to wait until the program’s implementation date (end of this month)?

= If a loan is from one financial institution, the pre-workout program of that institution can be used; if loans are from two or more financial institutions, debt adjustment through the Credit Counseling and Recovery Service can be used. It is possible to recover credit by using these currently operating general programs.

▲ How can one avoid delinquency?

= Once delinquency occurs, additional late interest accumulates and credit scores are negatively affected, worsening repayment conditions, so prompt action is necessary. Delinquency concerns can be resolved by adjusting repayment plans through pre-workout programs operated by individual financial companies or rapid support for delinquency risk borrowers by the Credit Counseling and Recovery Service. If there is repayable income, debt can be reorganized through debt adjustment by the Credit Counseling and Recovery Service or the court’s personal rehabilitation system. Both systems involve partial debt reduction followed by monthly installment repayments, but differ in detailed adjustment methods, so it is necessary to choose the system most advantageous to oneself.

▲ What if debt collection is too aggressive?

= While it is difficult to completely block debt collection, excessive contact or threats are classified as illegal debt collection practices and legal defense measures are possible. If illegal debt collection is suspected, one can report to the Financial Supervisory Service’s Illegal Private Loan Reporting Center (1332) for protection. Especially if harassed by loan sharks or private lenders, one can apply for 'Free Support for Debtor Representatives and Litigation Lawyers' through the Financial Supervisory Service or the Korea Legal Aid Corporation (132) to receive a free lawyer who can stop collection calls and represent in lawsuits against illegal debt collection.

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