Today, we’re going to take a look at a recently launched online, one-stop shop for refinancing.
A loan refers to the exchange of an existing loan for another loan with better terms and conditions.
Since the 31st of last month, credit loans of KRW 1 billion or less in Korea can be easily exchanged using a smartphone without having to visit a financial institution’s branch.
In fact, this system has been in the works for some time with the aim of expanding convenience for financial consumers.
After President Yoon Seok-yul pointed out the problem of banks charging high interest rates earlier this year, financial authorities sped up preparations for the infrastructure, seeing it as a good way to strengthen interest rate competition among banks.
In the three days since the system opened, loans totalling KRW154.1 billion and averaging more than KRW50 billion a day have been exchanged smoothly.
There are observations in the financial world that the accumulation of easy low-interest loan cases could significantly accelerate interest rate competition among banks.
In fact, President Yoon is said to have been quite positive about the establishment of this system as one of the measures to strengthen competition among banks.
It is also noted that such a system, which combines finance with information technology (IT) services, could bring about major changes in the business practices of the financial sector in the long run.
● Loans from 53 financial companies, switched in 15 minutes with a smartphone
The ‘Online and One-Stop Loan Infrastructure’, which began operations on the 31st of last month, is a system that allows users to view information on existing loans from banks, savings banks, card and capital companies through a smartphone app and switch to a new loan with favourable terms at once.
There have been several platforms comparing loan products before, but the main feature of this system is that the existing loan is automatically repaid when moving to a new loan.
The financial authorities explain that it can be done in 15 minutes with a smartphone app, without the need to visit a lender’s branch.
The existing loans that can be transferred through this system are credit loans of 1 billion won or less from 53 financial companies, including commercial banks, and products without guarantees or collateral, such as employee loans and negative passbooks.
These 53 financial companies include all 19 domestic banks that offer personal credit.
It also includes major savings banks and card and capital companies, so you can assume that most personal loans are covered.
However, it does not include loans from insurers and money lenders.
You can switch on loan comparison platforms and traditional lender apps.
There are two main types of apps that you can switch to.
There are two types of apps: loan comparison platform apps already built by NAVER Pay, Bank Salad, Kakao Pay, TOS, Pinda, KB Card, Welcome Savings Bank, etc. and individual financial company apps such as NH Bank, Shinhan Bank, Woori Bank, Hana Bank, KB Bank, Kakao Bank, K Bank, Shinhan Card, and Samsung Card.
In the loan comparison platform app, you can compare loan terms from multiple lenders and switch loans by going to the selected lender’s app.
Individual lender apps allow you to view your existing loans with other lenders and switch to their products.
To switch, you’ll first need to select a loan service in these apps, then check the interest rate and balance of your existing loan, and enter your income, work, and asset information to see the terms of your new loan.
The idea is to weigh up the interest you’ll save by refinancing against the early repayment fees you’ll incur if you pay off your existing loan.
If you find a loan that’s actually more favourable, you can select it and then proceed to the actual loan agreement on the lender’s app.
Once the contract is complete, your existing loan will be automatically repaid through the loan shifting system.
● 14.8% → 6.5%, 19.9% → 14.4% per annum… KRW154.1 billion loaned in three days
The loan shifting infrastructure is available from 9am to 4pm every business day during banking hours, with no limit on the number of times it can be used.
The service, which was launched with considerable interest, resulted in a total of 1,792 loan repayments in three days, amounting to KRW154.1 billion.
Examples cited by the financial authorities include a 48스포츠토토 million won general credit loan with a 14.8 per cent annual interest rate from a savings bank being exchanged for a 6.5 per cent bank loan product, and a 19.9 per cent general credit loan from a savings bank being exchanged for a 14.4 per cent credit loan from a credit card company.
However, based on the approximately 47.4 billion won in loans made on the first day, more than 90 per cent of the loans moved from bank to bank (95.7 per cent by number and 90.5 per cent by amount).
This means that the share of low-interest loans to high-creditworthy people may not be as large as the financial authorities suggest, as bank loans are probably more likely to be low-interest loans to high-creditworthy people.
Payday loan infrastructure bounces back from Yoon’s call
As mentioned earlier, the establishment of a loan-to-own infrastructure was something that the authorities were already preparing for in terms of improving the convenience of financial consumers.
However, the speed of preparation and the extent of participation by financial companies may have been greatly influenced by President Yoon Seok-yeol’s call earlier this year.
After Yoon emphasised the public good nature of banks in his work report to the Financial Services Commission in late January, and pointed out that people were suffering from high interest rates, the issue of lowering interest rate burdens by strengthening competition among banks became an important issue.
President Yoon Seok-yul speaks during the Financial Services Commission’s 2023 government work report at the Cheong Wa Dae presidential office in Seoul on 30 January. Presidential Office Photojournalists
Since then, the financial authorities have been discussing various measures by forming a task force to improve banking management, business practices, and systems, and the infrastructure for payday loans is a key part of the plan.
The task force, which plans to release the results of its discussions later this month, is discussing a variety of measures, including increasing competition by granting new banking licences.
In fact, there are already 20 banks operating in the country.
Excluding specialised banks such as the Export-Import Bank of Korea, there are five major commercial banks such as KB Kookmin Shinhan and Woori NH, as well as local and foreign banks, and three internet specialised banks.