[Get 1% More Interest, Pay Less] Check Policy Finance Before Going to the Bank

Saving a Lump Sum with Just Around 100,000 KRW per Month for Youth
From as Little as 7 Million KRW to Up to 100 Million KRW
Reducing Burden with Student Loan Interest Support
Utilizing Policy Finance Including Refinancing Second-Tier Financial Sector Mortgage Loans

[Image source=Yonhap News]

[Asia Economy Reporter Song Seung-seop] To save on interest, it is necessary to develop a habit of prioritizing policy financial products. Since the government allocates the budget, most of these products offer better benefits than the market. However, it is advised to carefully examine them as the names and types of policy financial products are similar but the conditions vary.

Policy Financial Products That Help Save 10 Million to 100 Million KRW for Young Adults Starting Their Social Life

Policy financial products targeting youth have gained sensational popularity every time they are launched. The ‘Youth Leap Account’ announced as a presidential campaign pledge by President Yoon Seok-yeol is a policy financial product designed to help people in their 20s and 30s accumulate up to 100 million KRW over 10 years. Young adults aged 19 to 34 with earned or business income can deposit money monthly within a certain limit, and the government provides support funds to help them build a lump sum with interest. Even though the specific product design has not been released, thousands have already formed related communities.

The ‘Youth Tomorrow Savings Account’ introduced by the Ministry of Health and Welfare has a similar structure in that if you save 100,000 KRW monthly, the government matches it with 100,000 KRW, but the maturity period is relatively short at 3 years. Eligible applicants are working youth aged 19 to 34 with monthly income exceeding 500,000 KRW but not exceeding 2 million KRW. Upon maturity, a total of 7.2 million KRW plus deposit interest can be received. For basic livelihood security recipients and low-income groups, there is no income condition, and applicants aged 15 to 39 can join. The government support amount is 300,000 KRW monthly, allowing them to accumulate over 14.4 million KRW. The application period is from the 18th of this month to August 5th, with support starting in October.

There is also the ‘Youth Hope Savings Account’ for low-income youth. Applicants must be aged 15 to 39, belong to a livelihood security household, or have income below 30% of the median income, and have earned income. Monthly support includes a work income deduction of 100,000 KRW and an earned income incentive of 45% of income (up to 538,000 KRW per month). Maintaining the account for 3 years results in a total accumulation of 14.4 million KRW.

Local governments operate similar programs such as the ‘Hope Double Youth Account (Seoul)’, ‘Joy Double Account (Busan)’, and ‘Youth Hope Account (Daejeon)’.

There are also ways to reduce student loan interest. Seoul City runs a student loan interest support program in January and July. Eligible applicants are Seoul-based university and graduate students who are basic livelihood security recipients or fall within the 8th income bracket or below. The Ministry of Education has introduced a policy from this month to reduce the interest burden by an average of 2 percentage points for student loan borrowers before 2012. Those who took out general repayment student loans from the second semester of 2009 to the second semester of 2012 can lower their interest rates through low-interest refinancing loans.

Using Policy Financial Products When Switching to Fixed Interest Rates Also Reduces Interest Burden

Using policy financial products related to housing can reduce the interest burden caused by high housing prices and offset risks from rising base interest rates. The representative product is the Bogeumjari Loan, which applies a fixed interest rate from the loan date to maturity. It can be applied for when purchasing a new home or returning a jeonse deposit. The interest rate as of this month is 4.50% to 4.85%, and the maximum maturity is up to 40 years. While a longer maturity increases the total interest amount, it reduces the monthly principal and interest repayment amount, thereby lowering the interest burden. Interest rate discount coupons can be obtained through the Housing Finance Portal application, or about 1 percentage point can be cut through family love preferential interest rates.

If you have a variable interest rate or lump-sum repayment mortgage loan from a secondary financial institution, you can use the ‘Better Bogeumjari Loan’. This allows you to switch your secondary financial institution mortgage loan to a fixed interest rate and installment repayment method during periods of rising base interest rates to save on interest. Applicants must have a combined annual household income of 70 million KRW or less. Income conditions are relaxed for newlyweds or families with multiple children. The maximum application amount is 200 million KRW, and up to 300 million KRW if there are three or more minor children.

For homeowners without a house, the Didimdol Loan is available at an interest rate of 2.15% to 3.00% annually. The combined annual household income must be 60 million KRW or less (70 million KRW for first-time buyers, newlyweds, or families with two or more children). The loan can cover up to 70% of the loan-to-value ratio (LTV), but this may vary depending on the debt-to-income ratio (DTI), loan structure, and income assessment.

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