Competition in Debt Refinancing Also Unfolds at Bank Counters

One-Stop Debt Refinancing Service Starts from the 31st
Refinancing Quickly Available Not Only via Loan Rate Comparison Apps but Also at Bank Counters
Commercial Banks: "Competition in Credit Loan Rates Will Also Occur at Service Counters"

Starting from the 31st, the 'One-Stop Refinancing Loan' service, which allows immediate switching to cheaper credit loans from other banks, will begin, enabling instant refinancing loan services at bank branch counters as well.

Originally, the One-Stop Refinancing Loan was known as a service provided by Toss, Finda, Naver Financial, KakaoPay, and BankSalad that allows customers to select and immediately switch to cheaper credit loan products from other banks. However, the Financial Services Commission explained that refinancing loans can be processed immediately not only through apps but also at bank counters upon application.

On the 26th, a Financial Services Commission official stated, "The infrastructure underlying the One-Stop Refinancing Loan service can be utilized at bank counters as well," adding, "Since refinancing loans at counters have become much faster and simpler than before, competition over credit loan interest rates will heat up not only online but also offline."

Until now, applying for refinancing loans at bank counters involved a complicated process. When a consumer applied for refinancing, the bank providing the new loan had to first repay the money the customer had borrowed from the original bank. Bank staff had to directly contact the other bank to confirm the repayment amount, transfer the funds, and receive a repayment receipt, which was a cumbersome procedure.

[Image source=Yonhap News]

A representative from a commercial bank said, "Bank staff had to verify multiple times and, due to the lack of clear regulations and concerns about errors, refinancing loans were generally avoided at bank counters," adding, "However, the newly introduced refinancing loan infrastructure simplifies this process, allowing counters to offer customers competitively priced credit loan products and actively promote refinancing loans."

The key to simplifying refinancing loans is as follows: when Bank A, which provides the new loan, receives a refinancing loan application from a customer, it repays Bank B, which originally lent to the customer, directly through the Financial Settlement System on behalf of the customer. Once this process is complete, Bank A converts the refinancing applicant into a new loan customer, and from then on, the customer repays Bank A. The Financial Services Commission stated that this process will take about 10 minutes.

Some expect that the refinancing loan market will not be as large as anticipated because the Financial Services Commission has set limits. The amount that can be moved through refinancing is capped at 10% of the previous year's new credit loan amount handled by the financial institution.

A report from Hana Financial Management Research Institute stated, "Based on this limit, the refinancing loan market is expected to be a maximum of 11 trillion KRW annually, and about 7 trillion KRW (7 months' worth) this year," adding, "while the domestic credit loan market is 250 trillion KRW annually, the refinancing loan market accounts for only 0.5%." This implies that it will be difficult for credit loan customers to flock to specific financial institutions and change the existing market landscape. In response, a Financial Services Commission official said, "If demand for refinancing loans exceeds expectations, we will consider adjusting the limits accordingly."

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