Let’s transfer our loans to low-interest-paying loans~!
A loan transfer program is a service which switches a high-interest loan to a low-interest loan. In December 2008, the Credit Recovery Fund started to give out low-interest loans to low credit holders, ranging credit level 7 to 10, who have borrowed below 30 million won. Since then, the Credit Recovery Fund has urged people who have borrowed money from specialized credit businesses, mutual savings banks, and private money lenders to change their loans into a bank loan, helping more than 5,600 people during the six months period. Starting June, the loan transfer program began widening the range of eligible people.
(6 banks participated: KB, IBK, Nonghyup, Shinhan, Woori, and Hana)
Now, let’s see how it works in real situation!
After being fired from a company, “Kim” has been running a small store of his own. He has borrowed from five specialized credit businesses and two mutual savings banks which totals to 21 million won. The interest charges he was paying for the loans were reaching up to 860,000 won every month. This was too much of a burden for him since he only earned 2 million won a month. Fortunately for him, he was able to transfer his loans to lower interest rate loans through the loan transfer program and now pays just 360,000 won a month for interest.
Now that we know what a transfer loan is about, let’s have a deeper look on how the system has changed after June 1 as target beneficiaries have been broaden.
Details of Broaden Eligibility
- Lower interest rates by raising loan guarantee ratio from 50~90% to 100% [Average interest rate decrease will be around 8% (e.g. 20% to 12%)]
- Expand eligible loans for loan transfer
- Ease regulation to revitalize credit businesses
- Extend loan maturities
In short, loan guarantees are higher and the interest rates are lower. More people will benefit from loan transfers than before. Those who are paying more than 20% interest payments and who have borrowed money before the end of 2008 are all eligible.
Furthermore, the eligible individuals for workout programs and debt reorganizations will be broadened from individuals with 3 months delinquency record to 1 month.
You can extend the redemption period as long as 5 years.
Then what about those who are already using transfer loans?
Don’t worry; the new rules will also be beneficial to the existing users.
The loan transfer program is expected to provide a brighter future for those who are burdened by paying high interest rate payments.
What are the expected outcomes?
First, interest burden will be lowered to 9.5~13.5% for low-income households.
Second, more people will benefit from the program.
And third, the original creditors will be able to collect funds, which otherwise could have turned insolvent, raising their lending capability.
Now, let’s see what is needed to complete the procedures.
–>Confirm whether you are qualified as a loan guarantee target
–>Submit an application to KAMCO and it will go through examination
–>Complete the guarantee contract
–>Apply for the loan at the designated bank
–>Execute loan transfer
Are you eligible for a loan transfer?
Why don’t you check if you qualify under following conditions?
-Individuals with credit level from 7 to 10
-Loan amounts less than 30 million won.
-Interest rate over 20%
-Currently without delinquencies
-Loans issued before the end of 2008