[ad_1]
In the second half of 2021, the government will implement a plan to reduce the legal maximum interest rate by 4% p from 24% per year to 20% per year.
The Financial Services Commission announced on the 16th that it plans to cut the maximum legal interest rate by reviewing the Executive Decree of the Commercial Loans Law and the Interest Restriction Law through consultations with the party government. Since the enactment of the Loan Business Law in 2002, the legal maximum interest rate has been reduced six times and, more recently, the interest rate has decreased from 27.9% per year to 24% per year in February 2018.
When and how to cut the legal maximum interest rate?
The legal cut to the maximum interest rate does not take effect immediately. It will be implemented in the second half of next year, considering the uncertainty generated by the spread of the new coronavirus (Corona 19). The Financial Services Commission explained that the time required for the review should be considered because it is done by reviewing the implementing ordinance.
Finance Commissioner Lee Myung-soon, head of the Office of Financial Consumer Affairs, said: “Unlike the interest rate cut in February 2018, there are concerns about the prolonged Corona 19 and the subsequent increase in the delinquency rate in the financial sector. It was decided between the parties, “he said.
The legal cut of the maximum interest rate, why?
It is analyzed that the main reason for promoting the cut of the maximum legal interest rate is the low interest rate. The Bank of Korea’s benchmark interest rate is 0.5% per annum, the lowest ever, and the average interest rate for loans in the financial sector is also declining.
In addition, it is analyzed that the majority of loan users (borrowers) who pay the highest interest rate legally are commercial loan users, who pay the highest interest rate regardless of their credit rating. To promote the legal maximum interest rate cut, the Financial Services Commission has reviewed the effects of the 2018 interest rate cut with the relevant ministries and related experts.
Director Lee Myung-soon explained, “After February 2018, when the highest interest rate was lowered for the last time, it is time to cut it, considering that the average interest rate in the household credit loan market it fell by 1.25% p and 1.5% p, respectively. ” did. He added that “(lenders paying 24% per annum) are uniformly applying the maximum interest rate of 24% of lenders regardless of their ability to repay their loans. It is true that the interest rate burden will not be reduced to unless the maximum legal interest rate is lowered. ” .
316,000 estimated number of ‘financial defectors’ turning away from institutional finance
The key is the possibility that savings banks and lenders will not make loans to borrowers who made loans at 24% per year as the legal maximum interest rate is reduced. It is an inevitable result that there are “financial defectors” who are forced to use illegal private financing because they cannot use institutional financing at all.
In February 2018, when the legal maximum interest rate was lowered, financial usage decreased to 261,000, or 18.7% of the 1,399,000 borrowers who used loans at an annual interest rate above 24% at the end of 2017, and from 40,000 to 50,000. It was estimated that (300 billion-350 billion won) flowed into illegal private financing.
Director Lee said: “If the maximum interest rate is lowered, finance companies can take a closer look at the creditworthiness of borrowers, and consequently there may be a side effect of increasing the number of people who can no longer use loans. “. From a standpoint, there is a strong incentive to continue absorbing borrowers who have the ability to pay as clients by further developing their detection capabilities and reducing excessive loan marketing costs. “
Currently, the Financial Services Commission assumes that the delinquency rate of financial companies will remain at the same level in June of this year. It was expected to drop by 483 billion won each year. Instead, about 13%, or 316,000, will reduce their use of financial institutions over the next three to four years, and 10% of those, 39,000 (230 billion won), are very likely to use illegal private financing.
To solve the problem, the Financial Services Commission plans to expand the offering of financial policy-making products, such as Sunshine Loan, by more than 270 billion won annually and establish measures to root out illegal private finance. Of these, it is expected that interest rate cuts such as the ‘Sunshine Loan 17’ will be promoted simultaneously.
Director Lee said: “If the maximum interest rate falls from 24% per year to 20% per year, I think it is correct that the interest rate on the Sunshine Loan 17, which is 17.9% per year, falls even more.” It seems to be implemented, “he said.
Related Posts
Loan collection by buying a home within a year after receiving more than 100 million won in credit loans
Why do banks recommend savings when lending?
Last year’s Big Tech + Fintech loans provided around 923 trillion … 3985% in the new 6 years ↑
Naver Financial Launches Year-End Loan Credit Products for Private Businesses with No Sales
In addition, it plans to support the strengthening of competitiveness in businesses with high interest rates, such as savings banks, credit companies and commercial loan rights.
Director Lee Myung-soon commented, “The government will also actively support companies that have provided exemplary credit to low-credit people, and will consider ways to offer incentives, such as reducing penalties for minor regulatory violations.” did.
