Annual 15.9% Emergency Living Expense Loan Interest Rate, Single-Digit Reduction Planned

With "Interest Burden High, Needs Reduction... Bank Contributions Necessary"

[Asia Economy Reporter Hyunji Kwon] A plan to reduce the emergency living expense loan interest rate of 15.9% per annum to a single digit is being considered. If the financial authorities reflect this, the interest burden on borrowers is expected to be somewhat alleviated.

Seong Il-jong, Policy Committee Chairman of the People Power Party, said in a phone interview with Asia Economy on the 12th, “The plan is to lend 1 million won to financially vulnerable groups as emergency living funds, but (if the 15.9% interest rate is applied) the interest burden will inevitably be high,” adding, “The Policy Committee’s position is that it should be lowered to a single digit.” Chairman Seong also stated that the supply amount of 100 billion won should be increased through bank contributions to expand the support targets.

On the 10th, Chairman Seong also requested a reduction in the loan interest rate for the product, saying, “For those who urgently borrow 1 million won, they have to pay about 15,000 won in interest per month, so it needs to be lowered further.”

The emergency living expense loan is a system that quickly supports up to 1 million won to prevent low-credit borrowers from turning to illegal private loans, and it is scheduled to be implemented next month. The support targets are low-income vulnerable borrowers with an annual income of 35 million won or less and a credit score in the bottom 20%, including low-credit delinquents and no-income individuals who were excluded from existing policy finance targets. The total supply amount this year is 100 billion won. However, the loan interest rate is fixed at 15.9% per annum, which has drawn criticism for being high.

However, the Financial Services Commission (FSC) holds the position that it is difficult to lower the emergency living expense loan interest rate itself. An FSC official said, “We are aware of the political requests, but we are not considering an immediate rate cut.” Instead, they are reviewing plans to further expand the reduction of preferential interest rates (2 percentage points) applied to borrowers with good repayment records.

[Image source=Yonhap News]

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