Need a Loan to Find a New Home? Twice the Pain for Jeonse Fraud Victims

Annual Low Interest Rate of 1%, Up to 160 Million KRW Financial Support
Support Provided for Moves with Deposit Under 200 Million KRW... Effectiveness Questioned
Experts Say "Interest Burden Should Be Reduced Through Low-Interest Refinancing Loans"

[Asia Economy Reporter Kwak Min-jae] Choi (31) visited a bank after hearing about a support program offering up to 160 million KRW at an annual interest rate of around 1% for victims of Jeonse fraud. He thought he would be eligible for a loan since the deposit of the Jeonse-fraud-affected house was under 500 million KRW. However, the bank rejected his loan application. Loans were only available when finding a new house with a deposit of 200 million KRW or less. Choi said, "I expected the low-interest emergency loan to reduce the interest burden, but it turned out that I had to take out an additional loan to move."

[Image source=Yonhap News]

Since the 9th, the government has implemented a ‘Low-Interest Emergency Loan’ using the Housing and Urban Fund as part of support measures for Jeonse fraud victims. Loans can be obtained from Woori Bank at an interest rate of 1.2% to 2.1% per annum, for up to 10 years, with a maximum limit of 160 million KRW (within 80% of the deposit). However, this is only available to victims without deposit insurance who are seeking a new house with a deposit of 200 million KRW or less. Low-income households with an annual income of 30 million KRW or less (50 million KRW combined for couples) can receive interest-free loans up to 100 million KRW (within 80% of the deposit).

However, the actual victims responded that this is just a ‘bureaucratic measure full of loopholes.’ They say the policy lacks effectiveness because it does not reflect reality. Since most have already taken high-interest Jeonse loans, only a few can qualify for additional new low-interest loans. Park (38), who was a victim of Jeonse fraud in Hwaggok-dong, Gangseo-gu, said, "When I took out the Jeonse loan, the interest rate was in the 3% range, but now it has doubled, and I struggle to pay over 1 million KRW in interest every month." He added, "Even if the interest rate is around 1%, how many people would take out an additional loan just to move?"

Concerns were also raised about requiring victims to enter into new lease contracts without preventive measures against Jeonse fraud. Victim Choi (29) said, "Taking out a low-interest loan to move and then signing a new lease contract is like killing tenants twice." He questioned, "Is there any guarantee that the landlord in the new lease contract is not a fraudster like the so-called ‘Villa King’? What happens if the deposit is not returned again due to fraud?"

There are also criticisms that the interest-free loan has high eligibility thresholds, reducing its effectiveness. To receive up to 100 million KRW interest-free, the annual income must be 30 million KRW or less. However, according to the Jeonse Fraud Support Center, the most common fraud amount ranges between 200 million and 300 million KRW. Considering the actual scale of damage, few victims meet the income criteria.

Experts pointed out that the current ‘Low-Interest Emergency Loan’ is ineffective as support for unreturned deposits. They emphasized the need for measures to alleviate interest burdens to provide practical support to victims. Professor Lim Jae-man of Sejong University’s Department of Real Estate said, "For victims without deposit insurance, it usually takes 1 to 1.5 years to go through civil litigation and auction procedures, resulting in significant interest burdens." He added, "It is urgent to provide support that allows refinancing at low interest rates to endure this long period."

In response, a representative from the Housing and Urban Guarantee Corporation, the entrusted institution for financial support operations, acknowledged, “We are aware of victims’ criticisms regarding the effectiveness of the Low-Interest Emergency Loan.” They stated, "We will carefully listen to victims’ feedback and comprehensively consider loan requirements and support targets based on the current situation and loan demand, and if necessary, discuss expansion with financial authorities and related agencies."

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