'Limit Over Interest Rate'... Advantages of the Special BoGeumJaRi Loan Launching on the 30th

If You Have an Existing Personal Loan, Special BoGeumJaRi Loan Offers Higher Limits

Special BoGeumJaRi Loan Interest Rates Start in the Mid-4% Range, Possibly Higher Than Bank Rates

[Image source=Yonhap News]

[Asia Economy Reporter Sim Nayoung] Financial consumers interested in the Special BoGeumJaRi loan launching on the 30th should pay more attention to the loan limit than the interest rate. With commercial bank interest rates on the decline, it is difficult to enjoy the benefits of policy financial products based on interest rates alone.

As of the 20th, the lower bound of fixed interest rates at the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) is in the low 4% range, showing no difference from the Special BoGeumJaRi loan, which promotes a '4% fixed interest rate.' This is why the Special BoGeumJaRi, a 'limited edition' policy financial product that integrates BoGeumJaRi loans, Anshim Conversion loans, and Eligible loans for one year, has been tagged with a 'well...' label even before its release.

Looking closer, the Special BoGeumJaRi interest rates are actually higher than those of commercial banks. For housing prices under 600 million KRW and combined couple income under 100 million KRW, the rates range from 4.65% to 4.95%, and for housing prices over 600 million KRW or income over 100 million KRW, rates range from 4.75% to 5.05%. The lower bound of these rates is above the fixed rates of KB Kookmin (4.36%) or NH Nonghyup (4.56%).

If all preferential rates are applied to the Special BoGeumJaRi loan, the interest rate can be lowered to 3.75%. However, since the conditions are strict?targeting low-income youth, newlyweds, single-parent families, and households with disabilities?it is predicted that receiving a rate in the 3% range will not be easy.

Currently, the financial sector expects that the government is likely to adjust the Special BoGeumJaRi interest rates while monitoring market conditions. A representative from the Korea Housing Finance Corporation stated, "The February interest rates will proceed as previously announced with no plans for changes," but added, "Considering market interest rates and available resources at the Housing Finance Corporation, adjustments will be made if necessary."

However, from the perspective of loan limits, the Special BoGeumJaRi loan is much more advantageous, according to banking officials. When taking out loans from commercial banks, there is a restriction of a 40% Debt Service Ratio (DSR), but this regulation does not apply to the Special BoGeumJaRi loan. Instead, a Debt to Income ratio (DTI) of 60% is applied. DSR calculates the loan limit including principal repayments of credit loans as well as mortgage loans, whereas DTI does not include principal repayments of credit or other loans when calculating the limit.

This means that for someone who already has a credit loan, choosing the Special BoGeumJaRi loan results in a higher loan limit. For example, assuming a salaried worker earning 70 million KRW annually with a 50 million KRW credit loan (6% interest) purchases a 900 million KRW apartment (4% interest, 30-year maturity), the Special BoGeumJaRi loan allows borrowing up to 500 million KRW, whereas commercial banks would allow up to 260 million KRW.

A commercial bank official advised, "Another advantage of the Special BoGeumJaRi loan is that there is no prepayment penalty, so when interest rates fall and commercial bank mortgage variable rates decrease, you can refinance. It is advisable to carefully consider both the loan limit and interest rate when selecting a product."

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