Toss Bank launches simpler, safer rental deposit loans

The Korea Times

The Korea Times

Finance

Tue, September 26, 2023 | 05:10

Companies

Toss Bank launches simpler, safer 'jeonse' deposit loans

Posted : 2023-09-05 16:00

Updated : 2023-09-06 15:58

Toss Bank CEO Hong Min-taek speaks during a press conference at Conrad Seoul Hotel in Seoul, Tuesday. Yonhap

Overseas remittance service to be available during H2

By Anna J. Park

Toss Bank, one of Korea's three internet-based banks, launched a housing rental deposit loan product on Tuesday, aiming to innovate the country's cumbersome and complicated rent system.

The loan product will be available for borrowers seeking to prepare the deposit money either for monthly housing rental contracts or for "jeonse" contracts. Jeonse is a unique lump-sum deposit payment in Korea for leasing a home for two years, without paying monthly installments to a landlord.

Normally, it takes at least two to four weeks with many visits to an offline branch of a major bank in Korea for a borrower to get a rental deposit loan. That's because the borrower is required to submit various documents, including leasing contracts and legal certificates of income, employment and family relations, among other things.

Toss Bank said it has streamlined the whole process, dispensing with the need to visit a bank branch. Just by logging into the Toss application, a borrower can easily register for the housing rental deposit loan product. The app automatically registers the customer's official documents, such as certificates of income or family relations, by linking the information from external institutions.

The mobile bank has partnered with the Korea Housing Finance Corporation (HF) to provide housing guarantee insurance policies at the lowest rate in Korea. The housing insurance plan guarantees an individual's rental deposit money in case a landlord refuses to pay back the deposit at the end of the contract. By using Toss Bank's jeonse loans, customers can subscribe to the guarantee insurance plan simultaneously at a price of only 0.02 percent to 0.04 percent of the jeonse deposit per year, which is about one-sixth of the average market price for housing guarantee plans.

The internet-only bank is also tackling the problem of information asymmetry borne by tenants by providing an alarm service, notifying them of any changes in the official records of their leased real estate register, such as a change of landlords.

"While preparing for the rental deposit loans, Toss Bank looked closely into how to get to the bottom of customers' needs and the core of their genuine anxieties and problems, and the bank aims to provide solutions to such problems," Hong Min-taek, the bank's CEO, said during a press conference on Tuesday.

"The gist of Toss Bank's rental deposit loans lies not only in convenience but also in safety, which is secured with the housing guarantee insurance plans. The bank hopes to help customers enjoy stability in matters of housing."

Since its official launch in October 2021, the mobile bank now has more than 7.55 million customers, with over 21 trillion won ($1.58 billion) in deposits and a credit loan balance of more than 10 trillion won.

With its solid growth, the internet-only bank succeeded in posting its first monthly surplus in July. The bank CEO attributes the surplus to its quantitative growth.

"In just 22 months after launch, the bank began generating a monthly net profit. The key reason is ascribed to the bank's quantitative growth," Hong said. "Toss Bank has experienced remarkable growth over the past months, drawing in over 7.55 million customers. What the bank highly values is that we manage to remain profitable, despite catering to many borrowers with lower credit scores, and building up a sufficient amount of capital reserves. The bank anticipates the growth trends both in scale and profit will continue into the third quarter."

The mobile bank also plans to roll out an overseas remittance service during the second half of this year.

"More than 16 million people travel overseas at least once a year and engage in various types of currency exchange, overseas payments and remittances," the CEO said. "Toss Bank is preparing to provide its unique solutions to address problems that can arise in the process to aid users."

annajpark@koreatimes.co.kr