Korean borrowers caught off guard as banks freeze mobile loan services

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Korean borrowers caught off guard as banks freeze mobile loan services

Published: 30 Jun. 2025, 14:22 Updated: 30 Jun. 2025, 14:33

Audio report: written by reporters, read by AI

Apartments in Seoul on June 29. [YONHAP]

A sudden clampdown on online lending has left borrowers scrambling, as Korea's major banks freeze mobile loan services in a bid to comply with the government’s tougher debt control measures.

This was the case for a 40-year-old self-employed business owner surnamed Kim, as they were caught off guard by the sudden suspension of online credit loans by their main bank.

“I often need fast cash for my business and repay the loan once payments are settled,” Kim said. “The government says this is to control housing prices in Seoul, but it’s causing unnecessary inconvenience to people like me.”

As of Sunday, major banks in Korea have halted online applications for mortgage and credit loans through mobile or internet platforms. KB Kookmin Bank stopped accepting online mortgage applications that day, while applications for credit loans have been suspended since 5 p.m. on Friday.

Shinhan Bank currently does not accept online applications for mortgages or jeonse (long-term rental deposit) loans but still allows online credit loans. However, the loan limit is now restricted to 100 percent of the borrower's total annual income across all financial institutions.

Hana Bank, Woori Bank and Nonghyup Bank have also suspended all online sales of mortgage and credit loan products, including refinancing options. Among Korea’s five largest commercial banks, Shinhan is currently the only one accepting online credit loan applications. Online jeonse loan applications remain available at all banks except Shinhan.

This temporary suspension is intended to reflect the government's new guidelines for tighter household debt management, announced on Friday. Financial regulators have imposed a cap of 600 million won ($442,500) on mortgage loans for home purchases in the Seoul metropolitan area and other regulated zones. Credit loans, which were previously available at up to two times one's annual income, are now limited to within the borrower’s yearly earnings.

“We’ve stopped online loan applications to prevent any regulatory violations caused by system errors,” a bank official said. “It will likely take one to two weeks for the system updates to be completed.”

Another banking source added, “This regulation came without much warning, so we need time to reflect the changes in our systems. Authorities want us to resume services quickly, but realistically, it may take longer than expected.”

A passerby checks apartment listings near Jamsil apartment complexes at a real estate agency in Songpa District, southern Seoul, on June 29. [NEWS1]

Competition among banks is also expected to influence the timeline for resuming online loan services. If one bank opens loans back up earlier, it could lead to a rush of applications, potentially disrupting its internal loan volume management.

“The system update itself doesn’t take long,” said a financial industry insider. “But banks are also watching each other closely. Rather than implementing additional measures like raising interest rates, limiting online loans seems like the best way to control the lending pace for now.”

In-person applications at bank branches are being allowed starting Monday. However, face-to-face loans typically carry interest rates around 0.2 percentage points higher than online loans, which could lead to growing dissatisfaction if the situation continues. In the first quarter of this year, 81 percent of new credit loans from the top five banks were issued online. For mortgages, the online share was also significant at 12.4 percent.

“There shouldn’t be significant market disruption since branch applications are proceeding without issue,” said a financial regulatory official. “We’ll keep monitoring each bank’s system updates and aim to minimize inconvenience for consumers.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM KYUNG-HEE [[email protected]]