In Busan, South Korea's second city, a peer-to-peer loan follows national law: interest limited to 20% a year, a signed acknowledgement of debt, payment in won and extra caution for seniors, who are numerous in the city and often targeted by fraudsters.
Second metropolis and a major container port
Busan has around 3.3 million inhabitants and one of the largest container ports in the world. Traders, sailors and small fishing businesses still make informal advances between acquaintances, which should be turned into a written contract before a single won changes hands.
The Munhyeon financial centre and the Korea Exchange
The Busan International Finance Center, in the Munhyeon district, houses among others the headquarters of the Korea Exchange. Its presence changes nothing: a loan between residents remains subject to the national cap and cannot be presented as guaranteed by the stock exchange.
A metropolis with a very large senior population
Busan is the first major Korean metropolis where more than one resident in five is aged 65 or over. Retirees who lend their savings to a relative or a neighbour should insist on a written document, as our page on loans to seniors recommends.
The gye, a Korean rotating savings circle
The gye is a Korean rotating savings group: each member pays a regular sum and the pot goes to one of them in turn. Still practised in some networks of traders and neighbours, it collapses if the organiser disappears with the funds.
National law applies to Busan residents
No municipal regulation alters lending law: the Interest Limitation Act and the 2020 law on P2P lending platforms apply as everywhere else. Our page on South Korea: loans between individuals summarises caps, taxation and registration.
Lenders registered with the metropolitan city
In Busan, small professional lenders register with the metropolitan city government. A financier handing out business cards near the markets or sticking up quick loan flyers without a registration number is very probably operating outside the law.
Fake prosecutors and retirees on the phone
Fraudsters often call elderly people posing as a prosecutor, a police officer or a bank employee, then offer a support loan or demand a transfer to protect the account. Hanging up and calling the bank back on its official number defeats this trap.
Offers from abroad in a port city
In this city facing the sea, some residents receive loan offers from abroad that demand transfer or currency exchange fees before any payout. The variations of this trap are covered in our analysis of the international transfer loan scam.
Helping a child buy in Haeundae or Suyeong
High flat prices in Haeundae and Suyeong push families to help each other. A loan between parents and children should set a realistic rate, real repayments and a dated contract, otherwise the tax authorities may treat it as a taxable gift.
Declaring interest to Busan tax offices
Busan has several tax offices under the NTS, the National Tax Service. A lender who receives interest should ask about the 25% withholding tax and the related local tax, 27.5% in total, and keep the contract to justify the amount declared.
Legal aid and free advice in Busan
The Korea Legal Aid Corporation has branches in Busan, and the Credit Counseling and Recovery Service helps over-indebted people. Foreign residents can get information from the Busan Global Center or call 1345 with questions about their residence status.
Busan, Daegu and south-east Korea
Daegu, less than an hour away by KTX, shares the same south-eastern economic region and similar habits. For traders working between the two cities, our page on peer-to-peer loans in Daegu completes this advice.
How to secure a private loan in Busan
- End verbal arrangements: turn every advance between traders or neighbours into an acknowledgement of debt signed by both parties.
- Check that the annual rate, fees included, does not exceed 20% and write it in figures and in words.
- If the lender is a senior, have a trusted relative or a legal adviser read the document before signing.
- Make the payment by transfer from a bank account with a clear description, and keep the bank receipt.
- Set a monthly repayment calendar and record each payment received in a dated table.
- Report to 112 any request for fees before payout or any call from a supposed prosecutor demanding a transfer.
Key figures for a loan in Busan
| Item | Order of magnitude (indicative) | Note for Busan |
|---|---|---|
| Maximum rate between individuals | 20% a year | Same throughout South Korea |
| Example of cost at the cap | At most ₩1,000,000 interest a year on ₩5,000,000 | Calculated over one year at the maximum rate |
| Tax on interest | 25% + local tax, i.e. 27.5% | Confirm with the tax office |
| Contribution to a gye | Set by the group | Possible loss if the organiser disappears |
| Fees demanded by a fake lender | Total loss | Never pay before receiving the funds |
Useful paperwork for lending or borrowing in Busan
- Identity card or alien registration card
- Dated and signed acknowledgement of debt
- Seal certificate (ingam) if a personal seal is used
- Bank receipt for the initial transfer
- Table of repayments made
- Written list of members and contributions for a gye
Costly mistakes in Busan
- Joining a gye without personally knowing all the members and the organiser, which makes any claim almost impossible if it fails.
- Believing a so-called prosecutor who asks you to move your savings to a secure account: no Korean authority works this way.
- Paying exchange or customs fees to a lender based abroad who promises an imminent international transfer.
- Lending all your retirement savings to a neighbour without security or a written document, at the risk of never seeing the capital again.
- Accepting money from a street financier who keeps your identity card or phone as collateral.
What Busan residents ask about private loans
Is the gye allowed in Busan?
The gye rests on a private agreement between participants and is not banned as such, but no authority supervises it. Write down the members, the amounts and the order of turns, and do not entrust large sums to an organiser you barely know.
Can a Busan retiree lend interest-free to a grandchild?
Yes, an interest-free loan is possible, but it must remain a genuine loan: a dated document, instalments and repayments by transfer. Without these, the tax authorities may reclassify the sum as a gift. A notary or a tax adviser can help choose the right arrangement.
How can I tell whether a Busan lender is registered?
Ask for their registration number and check it with Busan Metropolitan City or by calling the FSS on 1332. A lender who refuses, only gives a mobile number or asks for upfront fees should be avoided.
Do traders in Busan need a notary for a loan between them?
It is not compulsory, but for a large sum a notarised deed gives the lender an enforceable title if payments stop. For small amounts, a signed acknowledgement of debt backed by traceable transfers is usually enough to prove the debt.