As lending thresholds rose at not only commercial banks but also at everyday finance institutions such as savings banks and mutual finance, applications for auto title loans surged 2.5 times.
According to materials submitted by the Financial Supervisory Service to the office of People Power Party lawmaker Kim Sang-hun on Oct. 19, during roughly two months after the implementation of the "June 27 lending restrictions," which capped dwellings mortgage loan limits at 600 million won, savings banks received 248,000 individual applications for auto title loans. That averaged 5,636 per day, up 150% from the January–May average this year of 2,230 prior to the lending restrictions. During the same period, the average amount of loans handled also increased 25%, from 6.79 billion won to 8.49 billion won.
Savings bank auto title loans are often used by borrowers who cannot obtain as much as they want based solely on credit scores and try to raise their limits by using their cars as collateral. It is interpreted that lower-credit borrowers, unable to obtain unsecured loans from secondary financial institutions, shifted to auto title loans.
During the same period, the average daily number of savings bank personal credit loans handled fell 27%, from 4,930 to 3,614. Mutual finance also declined from 500 to 409.