Bank loan curbs drive borrowers to higher-cost savings banks

Tighter lending restrictions imposed by commercial banks are causing a growing number of borrowers to turn to savings banks, where interest rates are notably higher, according to industry officials. The government's ongoing effort to control household debt is driving this trend, according to a report published on Wednesday. Mid-interest loans for borrowers with low to medium credit scores now carry annual interest rates ranging from 9.7 percent to 16.2 percent, which is approximately two to three times the average for similar loans offered by commercial banks.

In the first half of this year, savings banks issued over 491,000 such loans, representing a 14 percent increase from the second half of last year and the highest level ever recorded, as reported by the Korea Federation of Savings Banks. If the current pace continues, the annual total could surpass the 1 million mark for the first time.

This shift is occurring as banks tighten access to household credit, which has traditionally been the primary source of financing for consumers. In July, KB Kookmin Bank reduced the maximum mortgage available to individual borrowers nationwide from 600 million won to 300 million won. Other major lenders, such as Hana Bank, have also limited online lending channels for similar purposes.