As regulations on household loans extend to credit lines (negative balance accounts), a "limit war" is intensifying between banks and borrowers. Banks are reducing limits and reclaiming unused credit, while borrowers are seeking to switch to banks with higher limits or find ways to maintain their existing limits.
According to the financial sector on July 7, major commercial banks are cutting credit limits in line with household loan management. KB Kookmin Bank and Woori Bank have lowered their maximum limits to 50 million won, while Hana Bank maintains a limit of up to 100 million won. Shinhan Bank allows borrowers to access up to 100% of their annual income. Although each bank operates differently, the trend of more conservative limit management is common. Internet banks have also reduced their limits from 200 million to 300 million won down to 100 million won.
Existing limit management is also being tightened. Shinhan and Hana banks, which previously had looser limits, are reducing credit lines that have not been used for an extended period, while K-Bank has completely halted new credit line openings this month. This measure considers that the established limits, regardless of actual loan execution, fall under household loan management.
As household debt management coincides with rising financial costs, the burden of interest rates has also increased. Even high-credit borrowers are facing higher costs, with negative balance account rates rising to the low 5% range. In May, the loan rates for borrowers with credit scores between 901 and 950 at the five major commercial banks ranged from 4.51% to 5.16%. Woori Bank (5.16%) and Shinhan Bank (5.06%) have already surpassed the 5% mark.
However, demand from borrowers remains strong. Following a surge in the KOSPI, there is ongoing demand for funds for stock investments, living expenses, and business operations. Consequently, there are increasing instances of borrowers moving to banks with relatively generous limits. Borrowers are also comparing local banks like Industrial Bank of Korea, Busan Bank, Gyeongnam Bank, and iM Bank, which still maintain existing personal loan regulations, to secure additional limits.
Online communities are sharing methods to maintain or maximize credit limits. Common strategies include submitting documentation related to lease funds or rental contracts to clarify funding plans, or applying for limit reassessment based on increased income.
Experts advise that if immediate funding is not required, it may be more beneficial to focus less on credit limits and consider personal loans instead. Most banks have eliminated early repayment fees for personal loans, and the interest rates for general personal loans are about 0.5 percentage points lower than those for negative balance accounts, making borrowing and repaying a more cost-effective option.
* This article has been translated by AI.
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