Savings Banks' 'Unsecured Loans' Most Frequent Among Bottom 10% Credit Scores

7 out of 10, Most Loans to Bottom 10% Credit
Based on 1-Year Personal Credit Loans, No Guarantee
Ultra-Low Credit Borrowers Executed Below 10% Low Interest Rate

Major savings banks have been found to provide the most personal unsecured loans to borrowers in the bottom 10% with very low credit scores. Typically, savings banks, which tend to attract low-credit borrowers, naturally have borrowers with low credit scores, but since these are unsecured loans without guarantees, there are warnings that they could become a trigger for increasing non-performing loans if the economy worsens in the future.

According to the industry on the 12th, among the top 10 savings banks by asset size last year, 7 companies (SBI, OK, Welcome, Pepper, Moa, OSB, Accuon Savings Bank) had the highest number of personal unsecured loans taken out by borrowers in the 1st decile (bottom 10%). In savings bank disclosures, personal credit scores are divided into 10 levels, each representing 10%.

The loan products used as the standard have a maturity of one year and are mostly unsecured products. This means there is no collateral to recover if the borrower fails to repay. From the financial institution’s perspective, losses can be significant when these become non-performing loans.

Although these loans were made to extremely low-credit borrowers who belong to financially vulnerable groups, some offered relatively low interest rates. For example, Welcome Savings Bank offered a minimum interest rate of 5.9% even to 1st decile borrowers. The interest rate range for 10th decile (top 10%) borrowers was 5.9% to 19.5%, with the bottom rate being the same. SBI Savings Bank also executed loans to 1st decile borrowers at a 7.9% interest rate, which was only 2 percentage points higher than the 7th decile (5.9%), who were among the highest-rated borrowers.

The savings bank industry stated that although these borrowers were rated in the 1st decile, they judged the borrowers to have sufficient repayment capacity through their own screening process. A representative from a savings bank explained, "The credit rating per borrower is for reference only from external credit rating agencies," adding, "Since loans were issued after sufficient screening, we believe there is no significant risk."

A considerable number of 1st decile borrowers were also found in apartment mortgage loans. Among the 7 savings banks that disclosed related information, SBI, OK, and OSB Savings Banks had the highest number of borrowers in the 1st decile.

Since these are secured products, the interest rates were much lower than those for personal unsecured loans. SBI Savings Bank’s interest rate range was 4.7% to 8.3%, and an inversion occurred where the rates for 1st decile borrowers were lower than those for 4th decile borrowers (5.4% to 7.6%), who were among the highest-rated. OK Savings Bank and OSB Savings Bank recorded rates of 6.36% and 5.25% to 6.5%, respectively.

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