“A welcome relief for low- and mid-credit borrowers” ... but a burden for card companies: “Sa-itdol Loan”

[Financial News] The rollout of Sa-itdol Loan II, which credit-specialized finance companies are preparing, is increasingly likely to be pushed into next year. It was initially expected in October this year, but most companies have not set a timeline, and some have yet to decide whether to launch at all, according to reports.
According to financial industry sources on the 1st, 5 of the 8 domestic standalone card companies (Samsung, Shinhan, KB Kookmin, Hyundai, Lotte, Hana, Woori and BC) have decided on the design of the Sa-itdol Loan II product. Of these, only 1 has set a target timeline within this year, while another is looking to next year. The remaining 3 are reviewing the timing.
The other 3 have made no decisions, including whether to launch or when, according to the tally. Depending on their own circumstances or market conditions, they may not bring out the product at all. Among capital companies, around 5 are said to be willing to prepare a product.
Sa-itdol Loan is a policy-based financial product developed by the Financial Services Commission and the banking sector for borrowers with low to mid-range credit who can repay their loans but have difficulty obtaining conventional credit loans because of low credit scores and other factors. The limit is 20 million won per person (30 million won for self-employed borrowers).
Sa-itdol Loan I is offered by commercial banks at interest rates of around 6% to 10%. Sa-itdol Loan II has so far been handled by savings banks, but to expand its reach, participation has been extended to card companies and capital companies. However, since these credit-specialized finance companies have yet to set concrete schedules, industry observers say it will be difficult to complete the process within this year.
Even if the product is launched, its volume is expected to fall short of the financial authorities’ expectations. The additional annual supply expected from the participation of credit-specialized finance companies is up to 500 billion won, but the industry is skeptical. The cycle of base-rate hikes is not yet over, so funding costs are expected to continue rising; moreover, mid-rate loan products are already available.
In the third quarter of this year, the 8 card companies handled 2.4517 trillion won in mid-rate loans, up 3.2% from 2.375 trillion won in the previous quarter. During the same period, 12 companies in the capital sector handled a total of 213.3 billion won in loans.
A financial industry official noted, “It is possible to acquire additional customers, but profitability is not high because interest rates are limited,” adding, “With merchant fees being lowered and bond yields rising, additional supply is a burden.”
Moreover, since Sa-itdol Loan is backed by a guarantee from Seoul Guarantee Insurance Company (SGI), procedures such as agreements between each credit-specialized finance company and Seoul Guarantee Insurance Company, as well as the calculation of guarantee fees, inevitably take time.
Against this backdrop, Shinhan Card also took the lead last month by introducing a livelihood stabilization loan, another policy-based product but one that does not require a guarantee. It is for customers in the bottom 50% of credit scores or lower, with a limit of 10 million won and a maximum loan term of 36 months. The annual interest rate ranges from 9.9% to 12.26%. A card industry official said, “Several card companies also plan to launch livelihood stabilization loans ahead of Sa-itdol Loan.”
[email protected] Kim Tae-il Reporter