Gov't announces debt forgiveness for low-income earners

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Gov't announces debt forgiveness for low-income earners

Published: 02 Oct. 2024, 11:02

A woman passes by a banner that shows information about the bank's home equity loan program posted on the exterior of a bank in Seoul on Sept.22. [YONHAP]

The government on Wednesday unveiled additional financial support for low-income earners that includes complete debt forgiveness for those who are willing but unable to repay their loans.

The move comes amid sharp increases in household debts and the number of people going bankrupt.

The number of people filing for debt restructuring jumped from 127,000 in 2021 to 138,000 in 2022 and then to 185,000 last year, according to the Financial Services Commission (FSC).

Previously, the government had only offered an interest-rate cut to people who were behind on their loan repayments by less than 30 days.

Under the new support plan, such people may be offered a debt reduction of up to 15 percent, while those who receive monthly government allowances for living expenses and owe less than 5 million won ($3,900) in overdue loans may have their debts completely forgiven should they be unable to repay after a year, according to the financial regulator.

The government will also boost its support for small business owners by injecting an additional 11.1 trillion won to increase policy lending and offer debt maturity extensions.

People with existing loans extended by policy lenders may have their debt maturity extended by up to one year should they be facing "temporary difficulties," while those with a special low-interest loan offered to the lowest-income earners may be allowed to repay their loans over up to 10 years, it said.

For young people starting new businesses, the government will offer a special low-interest loan that was previously available only to those unemployed or who work at small or medium-sized enterprises.

Also for the young people who are eligible for government support for their own livelihoods, the government will partly shoulder their interest payments on low-interest loans, bringing their interest rate to 2 percent from the current 3.6 percent, according to the FSC.

Yonhap