Loan Repayment Simulator

Loans are one of life's most important financial decisions. Whether for home purchase, business capital, or education, the repayment method significantly affects total interest burden. The loan repayment simulator helps you choose the optimal method by comparing equal installment and equal principal repayment approaches.

As of 2025, Korean mortgage loan rates are around 4-6% annually, with loan periods typically 10-30 years. For a 300 million KRW loan over 30 years at 4.5% annual interest, equal installment method requires monthly payments of about 1.52 million KRW with total interest around 240 million KRW. Equal principal method starts at about 1.95 million KRW monthly, gradually decreasing, with total interest around 200 million KRW.

Using the loan repayment simulator, you can accurately determine monthly payments and total repayment before loan execution. This allows you to select a repayment method matching your income and spending patterns while establishing long-term financial plans. You can especially prepare for future risks by simulating interest rate change scenarios.

Since banks offer different loan products and rates, comparing various conditions is important. Due to DSR (Debt Service Ratio) regulations limiting loan amounts relative to income, checking monthly payments with the simulator helps determine loan eligibility.

Equal installment and equal principal are the two basic loan repayment methods. Equal installment keeps the sum of principal and interest constant monthly, with higher interest proportion initially and higher principal proportion later. Monthly payment amounts are fixed, making financial planning easier.

Equal principal repayment keeps monthly principal constant while interest is charged only on remaining principal. Initial payments are higher but interest decreases over time, reducing payment amounts. Total interest burden is less than equal installment, making it economically favorable long-term, but initial burden is greater.

Comparing a 300 million KRW loan over 30 years at 4.5%, equal installment maintains 1.52 million KRW monthly while equal principal decreases from 1.95 million KRW first month to 840,000 KRW last month. Total interest is 240 million KRW for equal installment versus 200 million KRW for equal principal, a difference of about 40 million KRW.

If you have stable income and don't want payment fluctuations, equal installment is suitable. If you have high initial income expected to decrease over time, or want to minimize total interest burden, equal principal is advantageous. Self-employed or freelancers with income volatility may find equal installment safer.

The interest difference between methods grows with loan duration. For 10-year loans the difference is small, but for 30-year loans it can reach tens of millions of KRW. Therefore, longer loans require more careful repayment method selection.

Mortgage loans use housing as collateral, offering lower rates and higher limits than general credit loans. As of 2025, mortgage loan rates are 4-6% annually at commercial banks and 3.5-5.5% at internet banks. LTV (Loan-to-Value) is capped at 70%, DTI (Debt-to-Income) at 60%, and DSR at 40%.

LTV is the ratio of loan amount to housing price. For a 600 million KRW home with 70% LTV, maximum loan is 420 million KRW. However, speculation zones have LTV restricted to 40-50%. First-time homebuyers may get LTV relaxed to 80%.

DTI is the ratio of all loan principal and interest payments to annual income. For 60 million KRW annual income, DTI 60% means up to 36 million KRW annually or 3 million KRW monthly in loan payments. DSR is stricter than DTI, including all debts like credit loans and card loans.

You can choose between fixed and variable rates. Fixed rates have no interest rate fluctuation risk and are stable but initially higher. Variable rates start lower but burden increases with rate hikes. As of 2025, with expected rate cuts, variable rates are preferred.

Early repayment fees should also be checked. Most banks charge 1-2% fees for early repayment within 3 years. When a lump sum becomes available to repay the loan, fees can be substantial, so carefully review early repayment conditions when subscribing.

Jeonse loans are for securing jeonse (key money) deposits and differ from mortgage loans. As of 2025, jeonse loan rates are 1.8-3.0% for public Buttimok Jeonse Loans and 3.5-5.5% at commercial banks. LTV can reach 80-90%, higher than mortgage loans.

Buttimok Jeonse Loans are policy financial products for non-homeowners with combined couple annual income under 50 million KRW (70 million for first-time). Available for housing under 300 million KRW in Seoul area and 200 million in provinces, with maximum 120 million KRW (200 million for newlyweds).

Jeonse loans renew every 2 years matching lease contract periods and are repaid when deposits are returned at contract end. Therefore only interest needs to be paid without principal repayment burden, reducing monthly burden. For 100 million KRW at 3% annually, monthly interest is about 250,000 KRW.

Mortgage loans are for housing purchase with long-term (10-30 years) principal and interest repayment. Jeonse loans are short-term (2 years) with interest-only payments, so monthly burden is lighter but loan repayment becomes problematic if deposits aren't returned at contract end. Due to jeonse fraud risks, HUG jeonse guarantee insurance is essential.

Whether jeonse vs monthly rent vs home purchase is advantageous depends on personal financial situation and housing market outlook. Jeonse requires large sum but low monthly burden, monthly rent has low initial cost but high monthly expenses, while home purchase enables asset formation but has loan interest and maintenance costs.

Credit loans are unsecured loans based only on credit, with limits around 1-2 times annual income and rates of 4-15% tiered by credit rating. As of 2025, average commercial bank credit loan rates are 6-8%, internet banks 5-7%. DSR regulations limit total loan amounts, requiring careful use.

Credit loans are used when small amounts are urgently needed, for jeonse contract deposits or balance payments, debt consolidation (repaying high-rate loans), etc. Loan approval is fast with simple documentation, but high rates make long-term loans burdensome. Using as 1-3 year short-term loans with early repayment is advantageous.

Overdraft facilities (credit lines) allow free borrowing and repayment within limits. Interest is charged on a daily basis only for amounts used, so using only when needed minimizes interest burden. Rates are similar to or slightly higher than credit loans, but high flexibility makes them suitable for emergency funds.

For example, if you use 10 million KRW for 10 days from a 30 million KRW overdraft facility, you only pay 10 days' interest on 10 million KRW. At 7% annual rate, that's about 20,000 KRW interest. Credit loans charge interest on the full borrowed amount, so overdraft facilities are advantageous when partial amounts are needed.

When taking credit loans, compare rates across banks and utilize preferential conditions (salary transfer, card usage history, etc.) to lower rates by 0.5-1%p. Internet banks like Kakao Bank and Toss Bank tend to have lower rates and higher limits than commercial banks, worth comparing.

Excessive credit loans can cause credit rating decline and DSR excess, making future mortgage loans difficult. Avoid credit loans exceeding 50% of annual income, and if loan purpose isn't clear, not taking the loan is wise.

Early repayment means repaying part or all of principal before loan maturity. Most banks charge 1-2% of remaining principal as fees for early repayment within 3 years. For example, repaying 100 million KRW after 1 year may incur 1-2 million KRW in fees.

Even with early repayment fees, early repayment is often advantageous. For high-rate loans (6% or higher annually), paying 1-2% fees and repaying still provides significant long-term interest savings. For 300 million KRW at 6% over 20 years repaid fully after 5 years, despite 6 million KRW fees, you save over 100 million KRW in interest for the remaining 15 years.

Partial early repayment is also possible. Repaying just a portion when lump sums become available reduces interest burden. For a 300 million KRW loan, early repayment of 50 million KRW reduces remaining principal to 250 million KRW, decreasing interest. Equal installment method offers two options: shortening loan period or reducing monthly payments.

Loan refinancing means switching from high-rate to low-rate loans. Refinancing a 7% loan after 1 year to 5% significantly reduces interest burden. When refinancing, calculate whether it's profitable even after combining early repayment fees from existing loan and new loan fees.

The government provides policy refinancing loan products for high-rate borrowers. For ordinary people with annual income under 40-60 million KRW, low-rate refinancing at 5-6% is available through products like Haetsalloan and Saeheemanghollsi. If existing loan rates exceed 10%, actively consider refinancing.

When applying for refinancing, credit rating, income, employment period, etc. are reviewed, so if conditions have worsened, you may be rejected. Simultaneous applications to multiple banks can lower credit ratings, so apply to only 1-2 banks with best conditions.

Loan interest rates are determined by Bank of Korea base rate, market rates (CD rate, COFIX), and bank spreads. As of 2025, the base rate is 3.25% and may change based on economic and inflation conditions. Variable rate borrowers need caution as monthly payments change with rate fluctuations.

If rates rise 1%p, monthly payments on a 300 million KRW 30-year loan increase by about 200,000 KRW. This creates an additional burden of 2.4 million KRW annually and over 70 million KRW over 30 years. Therefore, before loan execution, simulate rate increase scenarios and verify sufficient income margin.

Choosing between fixed and variable rates is important. If borrowing when rates are low, fixing with fixed rates is advantageous. Conversely, when rates are high, taking variable rates benefits from rate decreases. As of 2025, with rate cut expectations, variable rates are more popular.

Mixed rates are also available. Products convert from fixed rates for the first 5-10 years to variable rates afterward. They secure both initial stability and long-term flexibility, making them good choices when rate outlook is uncertain. Rates are slightly higher during the fixed period but provide stability.

To prepare for rate increase risks, maintain reserve funds as emergency money. Keeping 6-12 months' worth of monthly payments as reserves allows continued loan repayment even during rate spikes or income decreases. Delinquency causes credit rating plunges and additional interest charges, so must be absolutely avoided.

Periodically review rates and seek refinancing opportunities. If rates have fallen 1%p or more, consider refinancing and attempt rate reduction negotiations with banks. Premium customers can receive 0.3-0.5%p rate reductions through bank negotiations.

DSR (Debt Service Ratio) is the ratio of annual principal and interest payments for all loans to annual income. From 2024, DSR 40% applies to all household loans, meaning with 60 million KRW annual income, only up to 24 million KRW annually (2 million KRW monthly) can be paid toward loan principal and interest.

DSR includes all debts: mortgage loans, credit loans, overdraft facilities, card loans, auto installments, etc. If already paying 500,000 KRW monthly for credit loans and 300,000 KRW for auto installments, additional mortgage loans are limited to 1.2 million KRW monthly. Exceeding DSR results in loan rejection.

To increase DSR, income must be proven. For employment income, submit withholding tax receipts; for business income, comprehensive income tax returns; for rental income, lease contracts. Combining spouse income increases limits, but requires joint-name borrowing with spouse sharing liability.

To lower DSR, repay existing loans or extend loan periods. Repaying credit loans first reduces monthly payments, improving DSR. Extending mortgage loan period from 20 to 30 years reduces monthly payments and lowers DSR, but increases total interest.

First-time homebuyers get DSR relaxed to 50%. Non-homeowners purchasing their first home can borrow more relative to income, advantageous for homeownership. However, speculation zones are excluded and housing price limits may apply.

For DSR calculation, bullet repayment loans (jeonse loans, etc.) apply virtual repayment amounts by dividing principal by loan period. For 100 million KRW with 2-year bullet repayment, actual payments are interest-only, but DSR calculation includes 4.2 million KRW monthly principal repayment, creating significant burden.

When purchasing housing, loan interest qualifies for income or tax deductions. Long-term mortgage interest payment deduction applies when non-homeowners purchase housing under 600 million KRW (2025 standard) base price with mortgage loans, with deductions up to 18 million KRW annually.

Deduction rates vary by repayment period. 15+ years with fixed rate or non-grace installment repayment: 18 million KRW limit; 10-15 years: 15 million; others: 5 million. With 50 million KRW annual salary, deducting 15 million KRW interest reduces taxable income to 35 million KRW, saving taxes.

Jeonse loan interest also qualifies for income deduction. When non-homeowner household heads sign jeonse contracts for national housing size (exclusive 85㎡) or smaller, deductions up to 4 million KRW annually apply. If jeonse loan interest is 3 million KRW annually, full deduction reduces income tax.

Housing subscription savings also allow income deduction. 40% of amounts paid into Housing Subscription Savings deducts up to 3 million KRW annually (1.2 million deduction). Paying 2.4 million annually deducts 960,000 KRW, saving taxes. Applies to non-homeowner household heads with annual income under 70 million KRW.

Real estate acquisition and property taxes must also be considered. For 600 million KRW housing purchase, acquisition tax is 1-3%, or 6-18 million KRW. Property tax is paid annually based on official price. First-time homebuyers have acquisition tax exemption benefits, so definitely apply.

Using gift tax exemption limits, receiving gifts from parents can reduce loans. Adult children can receive up to 50 million KRW (20 million for minors) from parents over 10 years without gift tax. Marriage funds are tax-exempt up to 100 million KRW, so newlyweds can lower loan burden with parental support.

Successfully continuing loan repayment requires thorough fund management. Setting repayment dates right after payday prevents delinquency from insufficient account balance. Set up automatic transfers and develop the habit of checking balance the day before repayment.

When delinquency occurs, delinquency interest is immediately charged. Delinquency interest rate is loan rate + 3%p, higher than regular interest. For 5% loans, delinquency interest becomes 8%, creating significant burden. Also, 5+ days delinquent lowers credit rating, and 30+ days registers delinquency information with credit bureaus, making future loans difficult.

During sudden income decrease or unemployment, consult with banks to apply for repayment grace (deferment). Suspending principal repayment for 6 months-1 year while paying only interest buys time to overcome temporary difficulties. Consulting banks beforehand is more advantageous for credit rating management than delinquency.

If loan repayment is difficult, utilize debt adjustment systems. Options include Credit Counseling & Recovery Service individual workout, court individual rehabilitation, etc., with benefits like rate reductions, repayment period extensions, principal reductions. However, credit rating drops significantly with 5-10 year restrictions on financial transactions.

Emergency funds should secure 6+ months of monthly living expenses. Must include loan repayments in calculations. If monthly payments are 1.5 million KRW and living expenses 2.5 million, keeping 24 million KRW (6 months of total 4 million) as emergency funds prepares for unexpected situations like unemployment or illness.

With multiple loans, prioritize. Repay high-rate loans (credit loans, card loans) first, low-rate loans (mortgage loans) later to minimize interest burden. When lump sums become available, the snowball strategy of repaying in order of highest rates is effective.