Banks Strengthen Loan Screening... Loans Not Available After Jeonse Contract Balance Due Date

Apartment complexes in the Songpa-gu and Gangnam-gu areas of Seoul.
[Image source=Yonhap News]

[Asia Economy Reporter Song Seung-seop] From the end of this month, major commercial banks will block jeonse loan disbursements after the balance payment date of the global lease contract. Borrowers can only use jeonse loans up to the amount that the jeonse price has increased before paying the remaining jeonse price. Regulations are tightening, such as one-homeowners not being able to receive jeonse loans through non-face-to-face methods.

According to the financial sector on the 17th, last weekend, loan officers from the five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?held an unofficial meeting to discuss management measures for jeonse loans. The meeting was held to create guidelines to prevent confusion among financial consumers. The guidelines will be applied starting from the 27th.

The guidelines are designed to fundamentally block borrowers suspected of not being genuine demanders or using the funds for purposes other than investment. If a borrower takes out a loan to renew a jeonse contract, the loan limit will be set according to the increase in the jeonse price. KB Kookmin Bank was the first to implement this on the 29th of last month, and Hana Bank has also been applying it since the 15th of this month.

Additionally, when signing a new jeonse contract, jeonse loans will only be available until the balance payment date specified in the lease contract. Currently, banks accept loan applications within three months from the earlier date between the move-in date and the resident registration move-in date for new jeonse contracts. However, with the new regulations, it is no longer possible to pay the jeonse price by borrowing money elsewhere and then execute the jeonse loan within three months after moving in.

Non-face-to-face jeonse loan applications by one-homeowners have also been blocked. One-homeowners must visit the bank counter in person to receive a jeonse loan.

The tightening of screening by commercial banks is to prevent the misuse of jeonse loans. Previously, tenants without jeonse loans could newly take out loans to create surplus funds or receive jeonse loans even after borrowing funds from family members.

However, since there are genuine demanders who need jeonse loans, the banks have kept face-to-face counter screenings open instead of completely blocking loans.

As of the 14th, the total jeonse loans from the five major banks amounted to 121.9789 trillion won, an increase of 15.94% compared to 105.2127 trillion won at the end of last year.

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