Saetdal Loan Users Save Up to 1 Million Won Annually in Interest

Annual Interest Savings of 1 Million Won per Worker
Saetdal Loan Products Ease Financial Burden for Vulnerable Groups
Saetdal Loan Youth Offers the Largest Rate Gap
Interest Rates Up to 16 Percentage Points Lower Than Private Lenders
Korea Inclusive Finance Agency Expands Support
Job Placement and Debt Management Programs Boost Financial Stability

Statistics show that workers with low credit scores who used the Saetdal Loan saved approximately 1 million won in annual interest costs. The interest rates on various Saetdal Loan products were up to 16 percentage points lower than those offered by private lenders, indicating that policy-based financial products for the common people are effectively reducing the interest burden for financially vulnerable groups.

On the 16th, a banner related to the Saetdal Loan was hung on the exterior wall of a bank in Seoul, where the interest rate for the policy loan for the common people was raised by 0.4%. Photo by Jinhyung Kang aymsdream@

According to the “Report on the Effectiveness of Policy-Based Financial Products for the Common People and the Impact of Expanding Contributing Institutions,” submitted by the Financial Services Commission to the National Assembly on January 6, the amount of interest saved through these products in 2023 was estimated to be between 231.8 billion and 637.5 billion won. This estimate was calculated by determining the difference in interest rates between policy-based financial products and those offered by private lenders and other financial sectors, multiplying this by the actual performance of the policy products, and then dividing by the number of users. The primary goal of these products is to support individuals with low income and low credit scores who have difficulty accessing mainstream financial services. The Korea Inclusive Finance Agency, under the Financial Services Commission, provides guarantees, while financial institutions supply the funds. If a guarantee event such as delinquency occurs, the Korea Inclusive Finance Agency compensates the financial institution on behalf of the borrower.

The product with the highest annual interest savings per person was the Worker’s Saetdal Loan. This product offers loans of up to 20 million won to workers who have low personal credit scores (700 points or below based on KCB) or low annual income (35 million won or less), making it difficult for them to use mainstream financial services such as banks. Applications can be made at mutual finance institutions such as local agricultural and fisheries cooperatives, Saemaeul Geumgo, credit unions, savings banks, and insurance companies. Users of the Worker’s Saetdal Loan saved an average of 997,000 won per year in interest costs compared to borrowing from private lenders.

Among policy-based financial products for the common people, the annual interest savings per person for the Worker’s Haepssalon was the highest at 997,000 won. Photo by Lee Jungmoon, Office of the Democratic Party of Korea

Next, users of Saetdal Loan Youth, a product targeting young people, saved 553,000 won in annual interest costs. This product is designed to support those preparing for employment or recent entrants to the workforce, allowing them to focus on their studies or job search. Individuals aged 34 or younger with annual income of 35 million won or less can borrow up to 12 million won at an annual interest rate of 3.5% for up to 15 years. Similar to the Worker’s Saetdal Loan, the Saetdal Loan 15, which is offered by first-tier banks, provided users with annual interest savings of 531,000 won. This product allows individuals with annual income of 35 million won or less, or those whose personal credit score is in the bottom 20%, to borrow up to 7 million won. Applications can be made at 14 commercial banks and KakaoBank.

The product with the largest interest rate gap compared to private financial companies was Saetdal Loan Youth. Users of Saetdal Loan Youth received loans at interest rates that were 16.2 percentage points lower than those offered by private lenders, 13.3 percentage points lower than savings banks, and 11.7 percentage points lower than credit card companies. For the Worker’s Saetdal Loan, the gap with private lenders was 9.6 percentage points, while for Saetdal Loan 15, it was 5.1 percentage points.

The Korea Inclusive Finance Agency not only provided financial support through these policy-based products, but also worked to enhance employment support and financial capability. In 2023, the number of job placement services provided to job seekers was 13,815, which is about an 11% increase from 12,496 in 2022, and the highest figure in the past four years (8,267 in 2020; 13,356 in 2021). The agency also continued efforts to improve users’ debt management capabilities through financial education and credit/debt management consulting. Notably, those who completed credit/debt management consulting saw their credit scores rise by an average of 2.4 points, whereas those who did not participate experienced an average decline of 4.7 points.

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