In Daegu, South Korea's fourth city, lending or borrowing between individuals is allowed provided the contract is in writing, interest stays at or below 20% a year, funds move through a bank and interest received is declared to the National Tax Service.
An economy built on textiles and subcontracting
Daegu, with nearly 2.4 million inhabitants, grew up on textiles and is home to many car industry subcontractors. Small business owners there sometimes borrow from family to get through a cash flow dip, which calls for a clear contract.
Seomun Market and credit between traders
Seomun Market, one of the oldest traditional markets in the country, runs largely on trust between traders. Advances of goods or money between stalls are best recorded in a dated acknowledgement of debt, even for a few hundred thousand won.
iM Bank, successor to the regional DGB bank
The city's historic regional lender, DGB Daegu Bank, became iM Bank in 2024 when it gained national commercial bank status. For a loan between individuals, using a bank account leaves a record of every transfer and every repayment.
Students at Kyungpook and Keimyung
Kyungpook National University and Keimyung University attract thousands of Korean and international students. Those borrowing from a classmate or relative to cover tuition fees will find ideas on our page about the student loan between individuals.
The 20% ceiling applied to Daegu loans
The maximum rate set by the Interest Limitation Act, 20% a year since July 2021, applies to every loan agreed in Daegu. Excessive late-payment penalties added to get around this ceiling can also be reduced by a judge.
Using a notary to buy a business
For a loan intended to buy a business or equipment, a notarial deed gives the lender an enforceable title. Our page on the notary's role in a private loan explains why a real notary never asks for money through a messaging app.
Quick-loan flyers and unregistered lenders
Flyers promising a same-day loan with no checks still circulate in some shopping streets. A serious lender must be able to show registration with the metropolitan city; otherwise, review our warning signs about a scam lender.
Fake refinancing offered by phone
As elsewhere in Korea, fraudsters pose as a savings bank or a consumer credit company and promise a lower rate. They then ask for a commission plus copies of your ID card and bank passbook: send them nothing.
A Daegu lender's interest and the tax office
A private lender declares interest received as non-commercial lending income: 25% withholding plus a local tax equal to 10% of that amount, or 27.5% in all. Daegu tax offices, which report to the NTS, explain the forms and deadlines.
Suseong-gu housing and disguised gifts
A son who borrows from his parents for a flat in Suseong-gu must be able to prove real repayments. Without a contract or regular payments, the NTS may treat the arrangement as a gift, with tax potentially far heavier than any interest.
Legal advice and debt help in Daegu
The Korea Legal Aid Corporation, the Credit Counseling and Recovery Service and the Korea Consumer Agency offer consultations by phone or at regional offices covering Daegu and Gyeongbuk. A local lawyer remains essential for a major dispute or a property guarantee.
Family ties between Daegu and Busan
Many Daegu families have relatives in Busan, less than an hour away by high-speed train. Loans between the two cities follow the same rules; our page on a peer-to-peer loan in Busan details the frauds that target retirees.
How a peer-to-peer loan unfolds in Daegu
- State the loan's purpose in the IOU: workshop cash flow, study costs, housing or buying stock.
- Work out the effective annual rate including every commission and check that it stays below 20%.
- Ask the borrower for proof of income or turnover statements to judge their ability to repay.
- Sign in front of a witness, or before a notary if the sum equals several months of income.
- Send the money from an account in your own name and set up repayments by automatic transfer.
- File the contract, transfer records and tax returns for the full term of the loan and beyond.
Costs and caps to know in Daegu
| Heading | Indicative value | Remark |
|---|---|---|
| Interest cap | 20% a year | The excess portion is not owed |
| Worked example | 300 000 ₩ a year at most for 1 500 000 ₩ | Capped rate applied over one year |
| Tax withholding | 27.5% of interest | Non-commercial loan regime |
| Notarial deed | Variable fee | Quote in advance depending on the amount |
| Commission paid to a fake adviser | Refund very unlikely | Report to the FSS (1332) and the police |
What to gather in Daegu
- ID card or alien registration card
- Business registration certificate for a trader who borrows
- Proof of income or turnover statements
- Acknowledgement of debt or notarial deed
- Bank statements showing the transfers
- Automatic transfer authorisation for the instalments
Missteps and scams spotted in Daegu
- Accepting a same-day loan found on a flyer with no visible registration: such lenders often charge rates far above the cap.
- Sending a photo of your ID card and bank passbook to a stranger promising cheaper refinancing.
- Leaving an advance between traders unrecorded, which makes proof impossible in case of death or bankruptcy.
- Paying a notary or guarantor lawyer contacted through a messaging app to release a loan: real professionals do not work that way.
- Letting your parents fund a flat without a loan contract, risking a tax reassessment for an undeclared gift.
Daegu: answers to common questions
Can a Daegu shopkeeper lend money to a supplier?
Yes, on an occasional basis, with a written agreement stating the amount, a rate below 20% and the due dates. Lending regularly for interest risks being treated as a professional lender who must register. A lawyer or the local chamber of commerce can clarify this.
Can an international student in Daegu borrow from an individual?
Nothing forbids it, but they should sign a clear written agreement and state when their studies end. The lender will often ask for their alien registration card. Any online offer demanding fees before payment should be ignored.
What should I do about a quick-loan flyer handed out in Daegu?
Do not call the number. Note the name and number shown, then report them to the FSS on 1332 or to the police. These offers often hide illegal rates and aggressive collection aimed at the borrower's family or employer.
Must a small interest-free loan between friends in Daegu be declared?
With no interest there is nothing to tax, but a written record is still advisable. For a large sum, especially within a family, keep the contract and transfers to prove that it is not a gift.