The interest rates for medium-interest loans from the second financial sector, primarily used by ordinary people, will slightly decrease in the second half of this year. The interest rates for private medium-interest loans have been gradually declining since the peak in the first half of last year, easing the burden for both users and financial institutions.
According to the financial sector on the 30th, the financial authorities have confirmed the upper limit for private medium-interest loan rates in the second financial sector for the second half of this year at 9.56% for mutual finance, 12.33% for credit cards, 15.50% for capital companies, and 16.51% for savings banks.
The upper limit for private medium-interest loan rates by sector in the first half of this year was 9.91% for mutual finance, 12.39% for credit cards, 15.50% for capital companies, and 17.14% for savings banks. Except for capital companies, the rates will decrease by up to 0.63 percentage points. The private medium-interest loan rates also decreased by up to 0.31 percentage points compared to the second half of last year.
Medium-interest loans are credit loan products that provide relatively low-interest rates to individuals with low to medium credit ratings. They target borrowers in the lower 50% of the credit score distribution.
The interest rate upper limits are set every half year based on the funding rates of each sector. Financial institutions cannot charge interest rates above this standard. For example, although the upper limit for medium-interest loan rates in the mutual financial sector is 10.50%, even if a mutual finance institution funds at an interest rate of 11%, it cannot charge interest above this limit.
Mutual finance and savings banks maintained the maximum interest rate limit from the first half of 2023 to the first half of last year due to rising funding rates. Recently, as funding rates have decreased across sectors, medium-interest loan rates are also on the decline.
The decrease in medium-interest loan rates is positive for both financial institutions and borrowers. From the perspective of financial institutions, if funding rates continue to rise and they reach the interest rate limit for medium-interest loans, they cannot raise interest rates, which would deteriorate their revenue. Concerns have been raised in the industry that setting a maximum interest rate limit could restrict the operations of medium-interest loans from second financial institutions. If interest rates decrease, second financial institutions can expand their medium-interest loan offerings, allowing ordinary people to borrow at lower rates.
However, capital companies, which have reached the interest rate upper limit of 15.5% starting in the second half of 2023, will maintain the same rates in the second half of this year. The funding rate for capital companies has actually increased from 4.38% in November of last year to 4.43% in May of this year.