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Photo = Yonhap news |
[Alpha Biz= Paul Lee] South Korea’s Silver Loan Program, a vital financial lifeline for retirees in need of emergency funds, has been suspended as of July 9 after exhausting its entire annual budget in just six months.
According to the National Pension Service (NPS), the program stopped accepting new applications from 11 a.m. on Tuesday after depleting the 38 billion KRW ($27.5 million) allocated for 2024. The suspension reflects the growing financial hardship among elderly citizens, many of whom are increasingly reliant on loans to meet basic living expenses.
Launched in 2012, the Silver Loan Program offers low-interest emergency loans of up to 10 million KRW to South Koreans aged 60 and older who are receiving pension benefits. The loans cover essential needs such as rent deposits, medical bills, and funeral costs. The funds are typically disbursed within three days of approval.
The loans are highly accessible and affordable, with interest rates linked to the yield on five-year treasury bonds. For the third quarter of 2024, the rate has dropped to 2.51%—significantly lower than the 4–5% interest rates commonly offered by private banks for senior-specific loans.
NPS data show that by mid-2024, the program had already issued 5,384 loans totaling 34.8 billion KRW, surpassing 75% of the total loans issued in 2023. A majority of the loans—67.9%—were used for rental housing, followed by 30.4% for medical expenses, 1.2% for spousal funeral costs, and 0.5% for disaster recovery.
Borrowers repay their loans via automatic deductions from their monthly pension payments, using a principal-equal monthly installment plan over up to five years. With an optional grace period of one to two years (interest-only payments), repayment can be extended up to seven years.
Experts warn that without additional funding, many elderly citizens could be forced to turn to high-interest lenders in the secondary financial market. The Korea Institute for Health and Social Affairs recently reported that 57.6% of retirees said they need more than 3 million KRW per month to cover basic living costs. However, the average monthly national pension payment stands at just 729,000 KRW, with many seniors receiving far less—especially those in their 60s, whose average is 502,000 KRW.
Calls are growing for the government to secure additional budget to sustain the Silver Loan Program amid rising financial pressure on South Korea’s aging population.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
