One Month After Card Loan Standard Grade Disclosure... High Credit Borrowers Favor IBK Kiwoom Card Loans

Grades 9-10 Favor DGB Daegu Bank

[Asia Economy Reporter Ki Ha-young] One month after card loan interest rates were disclosed based on a standard rating system using default rates, attention is focused on whether card loan interest rates will decrease due to the new loan interest rate comparison system.

According to the card loan interest rates by standard rating brackets for each card as of the end of July, disclosed by the Korea Federation of Credit Finance Companies on the 21st, the average interest rate applied to grades 1-2 was lowest for IBK Industrial Bank Card at 7.87%. This is about 1 percentage point lower than Samsung Card’s 9.66%, which offered the lowest rate in the same grade last month. Some card companies were excluded from last month’s initial disclosure due to lack of preparation.

DGB Daegu Bank and Samsung Card also applied 9.05% and 9.11%, respectively, to loans for members in grades 1-2, providing relatively favorable conditions for high-credit borrowers.

Since the 20th of last month, the Korea Federation of Credit Finance Companies has standardized internal ratings into a 10-grade system based on default rates and disclosed ▲base price (non-discounted interest rate) ▲adjusted interest rate (discounted interest rate) ▲operating interest rate (final interest rate). The default rate refers to the probability of being overdue for more than 90 days within one year from the loan handling date. Previously, it was difficult to compare loan interest rates due to each card company’s different internal rating systems, and there were concerns about interest rate inversion. In response, the Federation reformed the loan interest rate system.

IBK Industrial Bank Card Advantageous for Grades 1-2, DGB Daegu Bank for Grades 9-10

According to the disclosure as of the end of July, among standard rating grades 3-4, which frequently use card loans, the card loan interest rates were lowest in the order of DGB Daegu Bank (11.40%), Woori Card (12.38%), and Citibank (12.53%).

For low-credit borrowers in grades 9-10, the lowest card loan interest rate was offered by DGB Daegu Bank. Last month, six institutions including DGB Daegu Bank provided card loans to members in grades 9-10. The applied interest rates were DGB Daegu Bank (18.90%), Hana Card (20.01%), Gyeongnam Bank (20.90%), Hyundai Card (21.36%), KB Kookmin Card (22.27%), and Samsung Card (23.41%), respectively.

With the recent surge in demand for funds for stocks and real estate, interest in card loans is increasing, and the market expects that the introduction of the card loan standard rating system will lead to a reduction in loan interest rates. In fact, as of the end of July, the average interest rates across all grades for each card company showed some increases compared to the previous month, but many decreased by as little as 0.1% to nearly 1.5%. The average interest rates across all grades as of the end of July were ▲Shinhan Card 13.70% ▲Samsung Card 14.22% ▲KB Kookmin Card 13.72% ▲Hyundai Card 13.67% ▲Lotte Card 13.87% ▲Woori Card 13.02% ▲Hana Card 13.25%. KB Kookmin Card and Samsung Card increased by 0.55 percentage points and 0.12 percentage points respectively compared to the previous month, but Woori Card decreased by 1.65 percentage points. During the same period, Shinhan Card decreased by 0.19 percentage points, Hyundai Card by 0.42 percentage points, and Lotte Card and Hana Card also decreased by 1.07 percentage points and 0.25 percentage points respectively.

The Korea Federation of Credit Finance Companies plans to apply the new loan interest rate disclosure system to unsecured loans next month and to cash services in November.

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