"Scared to Go to the Bank"... Average Interest Rate on Credit Loans Soars Past 4%

Korea Federation of Banks March Loan Interest Rate Disclosure
Average Interest Rate on Unsecured Loans Jumps to 4% Annually
Most Mortgage Loan Rates Also at 4%
Doubled Compared to One Year Ago

[Image source=Yonhap News]

[Asia Economy Reporter Sim Nayoung] Office worker Lee Mugyeong (33) was shocked by the interest rate when she tried to renew her overdraft account at a bank last year and repaid her debt. "My credit score is over 930 points, but the interest rate, which was in the low 2% range, rose to 4%. As soon as I checked the interest rate, I paid it all off. I thought I wouldn't make more than the interest even if I borrowed this to invest in stocks."

In finance-related communities, there are many complaints from office workers about the rapidly increasing interest burden these days. "The preferential interest rate has decreased, and the interest rate has almost doubled. I have to tighten my belt and prioritize loan repayment." "By the end of the year, the interest rate this month will look cheap," they say.

The average interest rate on unsecured loans at commercial banks has all exceeded 4% per annum. According to the Bankers Association's disclosure on the 21st, the average interest rates on unsecured loans (excluding microfinance) in March were 4.17% at Shinhan Bank and Woori Bank, 4.10% at KB Kookmin Bank, 4.09% at NH Nonghyup Bank, and 3.88% at Hana Bank. Even high-credit borrowers with credit scores above 900 are subject to a 4% interest rate.

A representative from Bank A said, "Considering that the rate was in the 2% range last year, the burden felt by consumers must have increased significantly," adding, "While new loans have decreased due to rising interest rates, the number of people repaying loans because of the interest has also increased, so household loans are continuously decreasing."

The average interest rate on mortgage loans (installment repayment method) also exceeded 4%. The order was Woori Bank (4.32%), Hana Bank (4.18%), Shinhan Bank (4.08%), Nonghyup Bank (4.02%), and Kookmin Bank (3.91%). The average mortgage interest rates at internet banks were relatively lower (KakaoBank 3.83%, K Bank 3.50%).

As loan interest rates rise, one in three new household borrowers in South Korea borrowed money at an interest rate in the 4% range. According to the Bank of Korea's loan proportion by interest rate level for deposit banks (as of February), borrowers with 4% interest rate loans accounted for 31.5% of all borrowers. This is a significant increase compared to 2.5% a year ago. On the other hand, borrowers with 2% interest rate loans decreased sharply from 81.2% to 15.3%. A representative from Bank B said, "The Bank of Korea raised the base interest rate once more on the 14th, and unsecured loan and mortgage loan interest rates rose simultaneously this month," adding, "The common view in the financial sector is that the upward trend in interest rates will continue for the time being."

Lee Chang-yong, the nominee for the governor of the Bank of Korea, also stated at the confirmation hearing on the 19th, "The inflationary phase will continue for about 1 to 2 years," and added, "Although interest rate hikes are unpopular, since inflation expectations are rising, I will focus on stabilizing expectations with preemptive signals of rate hikes."

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