As the financial authorities tighten loans at mutual finance institutions following bank loans, demand for loans is flocking to the lending industry.
According to the Financial Services Commission's recently released "Household loan trends for Feb. 2026 (preliminary)," loans at banks fell by 300 billion won, while loans at mutual finance institutions increased by 3.1 trillion won. NongHyup's loan balance rose by 1.8 trillion won, and Korean Federation of Community Credit Cooperatives (KFCC) loans increased by 1 trillion won. A financial industry official said, "As the authorities blocked bank loans, a balloon effect occurred with genuine borrowers moving to mutual finance institutions."
The authorities are hurriedly tightening loans at mutual finance institutions as well. NongHyup halted new bridge and relocation loans starting on the 10th of this month. The Korean Federation of Community Credit Cooperatives (KFCC) suspended new group loans such as final balance payments on presales, bridge loans, and relocation loans, as well as household loans through loan brokers, on the 19th of last month. The authorities are even discussing setting KFCC's household loan target for this year at "0."
As the authorities tighten lending, demand is shifting to the lending industry. According to data the Financial Supervisory Service submitted to Rep. Heo Yeong of the National Policy Committee of the Democratic Party of Korea, new loan amounts at the top 30 lending companies in the fourth quarter of last year totaled 795.5 billion won. That is the highest since the second quarter of 2022 (1.0243 trillion won). It was up 23% from the same period a year earlier (646.8 billion won) and 8% from the previous quarter (736.6 billion won).
A person in the lending industry said, "We expect new loan amounts in the first quarter this year also increased from the previous quarter."
There is also criticism that the authorities' review of an "ultra-strong regulation" not to extend maturities on loans for apartments in the Seoul metropolitan area held by multiple-home owners will only "fatten the lending industry." If a loan maturity cannot be extended, it must be repaid quickly, and if bank and mutual finance institution loans are blocked, there are few ways to raise quick cash other than the lending industry.
Experts also warn of side effects. Seo Ji-yong, a professor in the Department of Business Administration at Sangmyung University, said, "Current household loan regulations adjust only the aggregate volume in a one-dimensional way. In that case, vulnerable borrowers with low credit scores or urgent cash needs have no choice but to flow into high-interest lending," adding, "It seems necessary to supplement the system by strengthening reviews of each borrower's individual situation."