[Exclusive] Used Car Loan Amounts Vary Based on Credit Scores

Korean Federation of Credit Finance, Introduction of Vehicle LTV
Lower 10% Credit Scores Face Reduced Limits

[Image source=Yonhap News]

[Asia Economy Reporter Ki Ha-young] Starting from August, when purchasing a used car with a loan through a capital company, a 'Vehicle Loan-to-Value Ratio (LTV)' will be applied, where the loan amount is determined within the used car market price based on the credit score. In particular, for those in the bottom 10% of credit scores, when buying a used passenger car, they can only borrow the lesser amount between the vehicle LTV and the maximum loan limit.

According to the industry on the 21st, the Credit Finance Association recently announced a revision of the 'Guidelines for Improving Used Car Finance Business Practices' based on this content. This comes two years after the guidelines were first established in June 2019.

The revision newly introduces the concept of vehicle LTV, which is the loan-to-value ratio relative to the used car market price, and differentiates the loan limits. When purchasing a used car, the loan limit can be within the smaller amount between the used car purchase cost excluding incidental expenses and the market price database (DB). However, the vehicle LTV limit and the maximum loan amount vary depending on the credit score.

For example, according to the used car market price on 'Car365' operated by the Ministry of Land, Infrastructure and Transport, the price of a 2019 Hyundai Grandeur (IG) 2.4 GDI Premium is 24.5 million KRW. If the credit score is 'above the bottom 30%', the maximum vehicle LTV limit is 100%, so a loan of up to 24.5 million KRW can be obtained. On the other hand, for 'between the bottom 10% and 30%' (maximum limit 90%), a loan up to 22.05 million KRW is possible, and for 'bottom 10% or below' (maximum limit 80%), a loan up to 19.6 million KRW is possible.

Among these, those with credit scores 'above the bottom 10% and up to 20%' and 'bottom 10% or below' can borrow the lesser amount between the LTV limit and the maximum loan amount by credit score. The maximum loan amounts are 20 million KRW and 15 million KRW respectively, so a person with a credit score in the bottom 10% purchasing a 2019 Hyundai Grandeur can receive a maximum loan amount of 15 million KRW.

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