The South Korean government from the second half would have financial institutions offer debt relief for individuals struggling to pay debt from lack of income from job and business loss or sickness as a part of efforts to contain the risk from dangerous level of consumer debt.
Under the new program announced by the Financial Services Commission (FSC) Thursday, borrowers of mortgage and credit-backed loans proving troubles of meeting their monthly liabilities would be able to push back principal repayment for up to three years while paying off just the interests.
The relief program would be available by primary banks in the second half of this year and later be expanded to non-banking lenders like savings banks, mutual finance, and credit card companies.
In order to qualify for a delay in principal repayment, a borrower should be able to personally prove that he or she is not able to repay loans due to job loss, business closure, or illness. Official documents will be required such as unemployment compensation document, business shutdown form, and medical certificate.
Financial institutions will delay principal repayment for one year but the borrower will be allowed to apply for an extension two more times, allowing a delay in repayment for up to three years.
Borrowers, however, with installment loans will have to pay their interest as usual. Total interest payment could also pile up as loan maturity will also be extended.
To qualify for debt repayment extension, borrowers with mortgage loans should own a single house valued 600 million won or less. Those with sufficient pension, inherited property, or illness-related insurance coverage will be disqualified.
The FSC also said that mortgage loan borrowers unable to meet debt dues would earn a maximum year of losing their house in an auction if they cannot immediately find an alternative residence.
By Chung Seok-woo and Park Yoon-ye
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]