Toss Bank, Household Loans Reach 2 Trillion Won... 1 in 3 Borrowers Are Middle to Low Credit Score

Toss Bank announced on the 3rd that as of the end of February this year, the proportion of loans to middle- and low-credit borrowers reached 31.75%. The household loan balance was 1.9446 trillion KRW. Launched in October last year, Toss Bank is the latest entrant among the three internet-only banks but is catching up with competitors based on the Toss app, which is used by 20 million people.

According to Toss Bank, the day with the highest proportion of mid-interest rate loan executions was January 31, when more than half of the customers (50.18%) were middle- and low-credit borrowers. In the case of Kakao Bank, the industry leader, the household loan balance as of the end of February was 25.8979 trillion KRW (including credit, jeonse, and mortgage loans), with a middle- and low-credit borrower ratio of about 18.6%. K Bank's household loan balance was 7.49 trillion KRW, with a middle- and low-credit borrower ratio in the 18% range. However, Kakao Bank and K Bank were launched in 2017, so their operational history is longer than Toss Bank's.

Over the past five months, more than one in four (26.3%) of Toss Bank's middle- and low-credit borrowers were upgraded to high credit during the loan screening process. Toss Bank determines loan eligibility by analyzing customers' actual income through its proprietary credit evaluation model (TSS). The company explains that customers classified as "healthy middle- and low-credit borrowers" can enjoy opportunities for credit improvement compared to secondary and tertiary financial institutions. The average interest rate for middle- and low-credit customers who took out loans from Toss Bank was 7.7%, which is 5.6 percentage points lower than the average savings bank interest rate of 13.3%.

The interest rate range for customers with the best credit ratings was 2.71% to 3.81%. Toss Bank's middle- and low-credit customers received an average loan amount of 23.2 million KRW, and loans were executed for credit scores as low as 454 points (equivalent to past grade 8).

The number of customers who newly subscribed to the "My Limit Management" service to receive loans from Toss Bank was 360,343. The company explained that the My Limit Management service is similar to customers visiting a bank counter for loan consultations. Up to 80,701 people used this service in one day, and an average of 27,157 people visited Toss Bank daily.

Toss Bank's loan screening to deposit process was found to take an average of less than 3 minutes. It was popular among self-employed and small business owners who find it difficult to visit banks in person, as they could use the service via mobile without going directly to the bank. Two out of three customers (62%) received loans outside of bank business hours, including weekends. Among all loans used by Toss Bank customers, 75.4% were credit loans, followed by overdraft accounts (23.4%), emergency loans (0.8%), and Saetdol loans (0.4%).

A Toss Bank official said, "Our advanced credit evaluation model allows us to include a wide range of customers, and especially because we determine new loan eligibility based on actual income, there was particularly high interest from customers in need of loans. We will continue to strive to implement new banking services from the customer's perspective."

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