Did you know that there's a cap on yearly interest rates for loans in Korea? How much are you paying for your loan? It's crucial to understand that in Korea, yearly loan interests must not exceed 25 percent per annum. But what happens if a contract violates this maximum interest rate?
According to Article 2(1) of the Interest Limitations Act of Korea, any amount exceeding the maximum interest rate under the contract shall be void. Additionally, a person who has received interest in excess of the maximum interest rate may face punishment by imprisonment with labor not exceeding one year or by a fine not exceeding 10 million won.
This legislation aims to contribute to a stable economic environment for the public and to realize economic justice by prescribing appropriate limits to interest rates.
Exceptions to this maximum interest rate limit are outlined in Article 2(5) of the Interest Limitations Act. For instance, interest on a loan with a principal of less than 100,000 KRW is exempt from the maximum interest rate limit. Additionally, the Interest Limitations Act does not apply to financial businesses and credit businesses that fulfill authorization, permission, or registration requirements under other Acts, or unregistered credit service providers as per Article 9-4 of the Act on Registration of Credit Business, etc., and Protection of Finance Users.
In summary, this article has examined the provisions of the Interest Limitations Act, covering topics such as the maximum interest rate per annum allowed in Korea, the effects of violation, penalties, and the scope of application.
Virtual Lawyer Korea is dedicated to providing reliable information in English to assist those facing language barriers in Korea. If you have debt-related issues or require legal guidance, simply fill out a form on our website. Our team of lawyers, duly admitted to the Korean Bar, with our founding attorney boasting over 25 years of law experience, with his specialization in debt collection certified by the Korean Bar Association, are here to help.
