‘Easy loans’ to tackle loan sharks
Instead, they should use Korea Easy Loan, a social enterprise that was created with a 3 billion won ($2.5 million) investment by 19 financial companies aiming to offer access to safe and credible private banking for people with a lower credit rating.
Some Korean consumers with a low personal credit level or first-time borrowers have been forced to get involved in high-interest loans and loan frauds. Loan sharks who use aggressive illegal marketing via phone calls and text messages have taken advantage of their situation.
However, the FSS says the social enterprise introduces these people to a reliable financial institution with a reasonable interest rate and service commission.
“Once one registers at the Korea Easy Loan website, the person’s financial information is shared among the 74 affiliated financiers,” Kim Sang-rok, head of the micro-credit support team at the FSS, said. “So the borrowers have enough choice among the wide pool of financiers and can access a loan that is credible and safe.”
Sixteen commercial banks, including Shinhan, Woori and KB Kookmin, 37 savings banks, nine capital firms and other cooperatives such as Nonghyup and Shinhyup are affiliated with Korea Easy Loan.
Some banks, including KB Kookmin, Shinhan and Suhyup Bank, offer the same loan programs as they offer at branches, but with a lower interest rate when going through the Korea Easy Loan website, the FSS said.
For the first 10 months of this year, there have been 17,735 loans amounting to 176.9 billion won borrowed from the commission-free loan system. This is almost double the size of loans that were borrowed during the same period last year.
Nearly 60 percent of loan programs offered at Korea Easy Loan are mid-interest rate products for lower-credit holders. The interest rates are mostly between 6 to 12 percent, and a wide range of programs are available, from school tuition loans for college students to lower-interest loans for jeonse (lump-sum deposit rent contracts) seekers.
Demand for a trustworthy loan program for lower-credit holders arose as the number of victims of loan fraud has risen in recent years.
“The number of loan frauds and illegal high-interest loans increased sharply in 2014, when more sophisticated financial scams like smishing [scams via text messages] became common, mostly targeting lower-credit holders who have to reach out to nonfinancial institutions when they urgently need money,” Kim said.
BY KIM JI-YOON [email@example.com]