[Q&A] Corona loan extended until September… After termination, amortized over 5 years

The financial authorities announced on the 2nd that they will re-extend the loan maturity and interest repayment postponement measures for SMEs and small business owners affected by Corona 19 until September this year. In addition, a’loan soft landing’ plan was also prepared so that the debt repayment burden may be temporarily increased after the end of financial support so that the deferred repayment amount can be repaid up to the next five years.

However, the financial sector is also concerned that if such measures are continued, the financial sector’s ability to respond to insolvent loans will decline, and the insolvency of the real sector may be transferred to the financial sector. However, the financial authorities are in the position that the soundness indicators of domestic financial companies are currently good, and the scale of deferred interest repayment is not at a level of concern, but there is no problem.

The main details of the postponement measures for maturity extension and interest repayment, and the repayment methods, etc., are contained in the loan soft landing plan prepared by the financial authorities are summarized in one question and one answer format.

-How much is the extent of the extension of maturity and the delay in repayment of principal and interest?

“As of January 31, in all financial sectors, △Expansion of 121 trillion and 16 billion won (371,065) △ Deferment of principal repayment of 9.317 billion won (57,401) △ Deferment of interest repayment of 163.7 billion won (10,000) 3,219 cases) were applied.”

-Is there any change in the target of support when re-extension?

“It will be extended until September 30th as it is with the existing plan. As with the first implementation, this applies to small and medium-sized businesses and small business owners who have suffered direct or indirect damage from Corona 19, and there is no delinquency such as arrears of principal and interest, capital erosion, and closure of business.”

-Can I extend the maturity and apply for a loan soft landing measure? When can I apply?

“If you apply for an extension of maturity or deferral of repayment from the 1st of next month, a soft landing measure will also proceed. After consulting with a financial company, various long-term and partial repayment methods can be discussed. Likewise for existing applicants, if necessary, a financial company can discuss various long-term and partial repayment methods.” It is possible to consult with him.”

-Using soft landing measures Can the borrower pay off the loan any way he wants?

“Yes. From next month, the’Five Principles of Soft Landing Support’ will be applied so that various long-term and installment repayment methods can be selected in consideration of the situation of individual borrowers. For example, based on a case where a small business owner receiving a loan with a loan of 60 million won and a fixed interest rate of 5% with a one-year temporary repayment of the remaining maturity has been deferred for interest repayment for 6 months, △ the maturity is maintained, and the existing monthly after the end of the grace period. How to pay interest (250,000 won) and deferred interest (250,000 won) for 6 months △A method to pay the existing interest and deferred interest (125,000 won) for 1 year by extending the maturity by 6 months △Existing interest by extending the maturity by 2 years And a method of paying deferred interest (50,000 won) for 2 years and 6 months △It is possible to pay the existing interest and deferred interest (125,000 won) for 1 year by extending the maturity by 1 year and setting a deferment period of 6 months. The method is similar in the case of an amortization loan.”

-Can the maturity be increased indefinitely when the soft landing plan is applied?

“Continuing the debt indefinitely can be a burden on the part of the borrower as well. There are also opinions that the repayment period (1-5 years) of two or three times the grace period is appropriate. We will not limit any specific method or period within the company.”

-Are there any support measures for borrowers who are difficult to repay after the grace ends?

“We plan to operate programs to support soft landings of policy financial institutions (industrial and industrial banks, etc.) and actively utilize financial sector’s own programs such as loans.

-There are concerns that the extension of the loan maturity and the delay in repayment of interest may lead to the expansion of the financial sector’s insolvency.

“As the economic recovery is delayed and there is high uncertainty in the future, there is a possibility that the insolvency in the real sector may be transferred to the financial sector. However, the soundness indicators of domestic financial companies are good, and the financial authorities continue to monitor the soundness of the financial sector in the future, while accumulating sufficient provisions. We plan to steadily induce the expansion of loss absorption capacity, etc. In addition, financial support for companies experiencing temporary difficulties can improve the soundness of financial companies in the long term.”

-Wouldn’t it be an excessive burden on financial companies to let the borrower choose the repayment method and period in accordance with the’Five Principles of Soft Landing Support’?

“The principle of support for soft landing is to establish an optimal repayment schedule that suits each borrower’s situation through consultation between the financial company and the borrower. Deferral of repayment is to allow the borrower to choose a method that can be repaid in practice. It can be easy in terms of purpose and soundness management.”

Jeonghyun Kim reporter [email protected]

Kwak Joo-hyun reporter [email protected]

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