Banks Lower Interest Rates for Small Businesses... Up to 700,000 KRW Interest Cost Savings
Maximum Interest Rate Reduced by 1%p (Annual 4.99% → 3.99%)
[Asia Economy Reporter Park Sun-mi] The banking sector is lowering interest rates on the second financial support program for small business owners as a measure to share the burden caused by the spread of COVID-19.
The Korea Federation of Banks announced on the 29th that the banking sector has decided to reduce the maximum interest rate by 1 percentage point in line with the government's implementation of the 'Establishment and Reorganization of the Second Financial Support Program for Small Business Owners.'
The interest rate level for the second financial support program for small business owners currently stands at 2.44% to 4.99% per annum (as of the 24th), and with this rate cut, the maximum interest rate will be lowered from the existing 4.99% per annum to 3.99% per annum, a reduction of 1 percentage point.
This measure is expected to reduce the interest cost burden by up to approximately 700,000 KRW for low-credit borrowers who are subject to the maximum interest rate.
For low-credit borrowers who take out a loan of 20 million KRW with a 2-year grace period followed by equal monthly principal repayments over 3 years, the current interest rate of 4.99% per annum would require paying 3.53 million KRW in interest. However, with the new interest rate of 3.99% per annum, the interest payment will be 2.82 million KRW, resulting in an interest cost reduction of about 700,000 KRW.
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The banking sector explained that it will voluntarily lower interest rates to share the difficulties faced by small business owners due to business restrictions caused by strengthened quarantine measures and will absorb the resulting losses on its own. A Korea Federation of Banks official stated, "The banking sector will continue to strengthen financial support for companies and small business owners affected by COVID-19 and actively fulfill the banks' social responsibilities."
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