Online lending-savings bank linked loans top W500b, expanding mid-rate credit access

The cumulative volume of personal credit loans originated through partnerships between online investment-linked finance companies and savings banks has surpassed 500 billion won ($332 million). As major commercial banks tighten household lending limits, demand for alternative financing among mid- and low-credit borrowers is expected to grow.

According to the Online Investment-Linked Finance Association, the cumulative volume of savings bank-linked personal credit loans stood at 502.2 billion won as of July 3, about one year and two months after the service was introduced as an innovative financial product in May last year.

The linked-loan service combines the big data-based credit assessment capabilities of online investment-linked finance firms with the funding capacity of savings banks to provide mid-rate personal credit loans to mid- and low-credit borrowers who have had limited access to financing through conventional lenders.

The average interest rate on linked loans was 11.95 percent per year, the average credit score of borrowers was 739, and the average loan amount per case was 14.89 million won. The delinquency rate stood at 0.75 percent.

More than 95 percent of linked-loan users were mid- and low-credit borrowers in the bottom 50 percent of credit scores — mostly those who would have fallen in the fourth or fifth tier under the old credit-rating system. The primary users are borrowers who have steady income and repayment capacity but have not had sufficient access to financial services under conventional credit assessment frameworks.

However, the online investment-linked finance sector remains small in scale. Total outstanding loans in the sector account for about 0.11 percent of domestic household credit and are less than one-sixth of outstanding loans from licensed moneylenders. The association said the sector's significance lies in its ability to expand financial access for mid- and low-credit borrowers while maintaining sound asset quality, despite its modest size.

Linked loans through the online investment-linked finance and savings bank partnership are currently available through loan-comparison platforms including Toss, Finda, Banksalad, Naver Pay and Kakao Pay.

The association warned consumers about a rise in fraudulent loan advertisements impersonating online investment-linked finance firms through online channels and SNS. It said legitimate firms never require upfront payments, fees or deposits as a condition of loan disbursement, and urged financial consumers to verify whether a firm is registered with the Financial Services Commission and to check its official website and representative phone number.

Hong Jae-mun, chairman of the Online Investment-Linked Finance Association, said the sector "is still small, but it is demonstrating the potential to provide new financial opportunities for mid- and low-credit borrowers while also maintaining sound management." He added that the association would "expand the supply of sound mid-rate loans in line with financial authorities' policy direction and consumer protection principles."

Meanwhile, the amount savings banks invest through online investment-linked finance personal credit loan partnerships is counted as part of each savings bank's household lending volume and is subject to overall loan cap management. As a result, some savings banks that have reached their household loan limits have suspended new linked investments or are scaling back their participation.