Card Loans with Strengthened DSR, Maximum Contract Term of 3 Years... Installment Repayment Extended to 5 Years

[Image source=Yonhap News]

[Asia Economy Reporter Ki Ha-young] Financial authorities plan to limit the maximum contract maturity of card loans to three years when calculating the total debt service ratio (DSR) from next year.

According to the financial sector on the 15th, the financial authorities are currently discussing applying a maximum contract maturity of three years for lump-sum repayment card loans in the DSR calculation process. However, for installment repayments, an incentive will be given to reflect up to five years. This is to prevent the loophole of extending the card loan maturity to increase the loan limit.

Earlier, the financial authorities decided to reflect card loans in borrower-level DSR from next year through the household debt management reinforcement plan announced at the end of October. The contract maturity of card loans can be chosen by customers within the product limit. The longer the contract maturity is set, the lower the DSR ratio becomes, and the loan limit increases. To prevent this behavior, even if card loan borrowers set a long contract maturity, the financial authorities will reflect only a certain period when calculating the DSR.

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