Why Didn't My Loan Interest Rate Drop Even After Regular Salary Transfers?… FSS Says "Check This"

No Interest Rate Reduction Without "Salary" Label in Account

Interest Burden Varies by Repayment Method

Caution Required for Delinquency and Loan Extension

Even if you transfer your salary every month to the account at the bank where you took out your loan, you may not be eligible for the preferential loan interest rate if you do not register your salary information with the bank or fail to indicate “salary” in the transfer details.

On September 21, the Financial Supervisory Service provided guidance on precautions consumers should know when engaging in financial transactions, based on cases of financial complaints that have actually been filed. The main topics include the salary transfer condition for loan interest rate discounts, methods for repaying loan principal and interest, the loss of benefit of term in the event of loan delinquency, and changes in interest rates when extending loan terms.

First, to receive a loan interest rate discount based on salary transfer, you must register your employer and salary payment date with the bank where you received your loan. If you receive your salary at a different bank and then transfer a set amount to the loan bank account in order to have it recognized as a salary transfer, you need to specify in the account description that the funds are “salary,” “wage,” “monthly salary,” “bonus,” or other salary-related funds.

The method for registering salary transfers and the criteria for recognizing salary-related funds vary by bank. If you change jobs, you must notify the bank where you took out your loan of your employer change or update your salary information to continue receiving the interest rate discount, even if the account you receive your salary into remains the same. You should also pay attention to the differences in principal and interest repayment burdens depending on the loan repayment method.

▲Single-payment at maturity means you pay only interest during the loan period and repay the principal all at once at the end. This method reduces repayment burden during the loan period but significantly increases the repayment burden at maturity. ▲Equal principal and interest repayment divides the total combined amount of principal and interest into equal payments over the loan period. The amount you repay each month is always the same, making it easier to manage expenditures; however, the portion of principal repaid is low in the early stages, resulting in higher total interest payments compared to the equal principal repayment method. ▲Equal principal repayment divides the principal into equal monthly payments, which means a higher repayment burden at the beginning, but the overall interest burden is the lowest among the three methods.

An official from the Financial Supervisory Service said, “When signing a loan agreement, you need to weigh the pros and cons of each repayment method and choose the one most suitable for your financial situation and asset-building plans.”

If you fall behind on your loan repayment, your ‘benefit of term’ may be lost depending on certain conditions. For household loans, you may lose the benefit of term if you fail to pay interest for one month or if you miss monthly installment payments twice in a row. In the case of mortgage loans, the respective standards are two months and three missed payments. If you lose the benefit of term, you must repay the entire remaining loan balance, and late interest is charged on the full amount. However, if the principal of your loan is less than 50 million won, late interest is charged only on the monthly payments due through the maturity date.

You should also be aware that when extending a variable interest rate loan, the interest rate may change. The variable rate is made up of a base rate and a spread, and if the loan term is extended upon maturity, both the base rate and spread are recalculated at that time. As a result, the loan interest rate may increase or decrease compared to before.

If your credit has significantly deteriorated at the time of loan extension, the bank may refuse to extend the loan or may require a higher interest rate, a shorter maturity, or partial repayment, so it is important to maintain good credit at all times.

This content was produced with the assistance of AI translation services.