In Seoul, a peer-to-peer loan remains a civil contract under Korean law: interest is capped at 20% a year, a signed IOU is needed, money moves by won transfer, and borrowers must watch closely for voice phishing and rental deposit fraud.
Seoul, the country's financial capital
Seoul has about 9.4 million residents, the head offices of the major banks and the Yeouido financial district, home of the Financial Supervisory Service. Even so, informal loans between colleagues, friends and relatives are common, and they are often agreed without anything in writing.
The jeonse deposit, the main reason to borrow from family
Jeonse, a very large rental deposit paid to the landlord instead of monthly rent, leads many Seoul residents to borrow from their parents. These advances must be documented so they are not treated as gifts; see our page on loans to tenants.
Jeonse fraud in Gangseo district
In 2022 and 2023, jeonse fraud hit tenants of small Seoul apartment buildings, especially in Gangseo district, where landlords owning hundreds of units failed to return deposits. Before lending money for a deposit, always check the property register for mortgages and seizures.
Students and young workers targeted by easy offers
With its many universities and a tight job market for young people, Seoul draws quick-loan offers spread on Instagram and messaging apps. The most dangerous ones target students and young employees, promising money without checks in exchange for fees paid upfront.
Expatriates in Seorae, Itaewon and Gangnam
Foreign communities, such as the French in Seorae Village or expatriates in Itaewon and Gangnam, sometimes lend to compatriots passing through. A bilingual agreement reviewed by a Korean lawyer then reduces disputes about which country's law applies to the loan.
The national framework applied to the capital
Seoul has no rules of its own: the Interest Limitation Act sets the maximum at 20% a year, and a 2020 law regulates online lending platforms. Our guide to the peer-to-peer loan in South Korea explains these laws in detail.
Daebu lenders registered with the Seoul city government
Small lending companies operating in Seoul register with the metropolitan government. A lender who cannot provide a registration number that can be checked with the city or the FSS should be treated as illegal, whatever arguments or references it puts forward.
The fake loan refinancing adviser
It starts with a call or text offering to replace an expensive loan with a cheaper one. The fake adviser has the old loan paid off into a designated account owned by the fraudsters; read our report on phishing and fake lenders.
Tax on interest received by a Seoul lender
A Seoul resident who earns interest on a private loan falls under the national regime: 25% income tax, plus a local tax equal to 10% of that amount. The district tax office, which reports to the NTS, can answer questions.
The Seoul Financial Welfare Counseling Center
The metropolitan government funds budget advice and debt relief centres grouped under the name Seoul Financial Welfare Counseling Center. They help over-indebted residents free of charge to negotiate with creditors or prepare an application to the Credit Counseling and Recovery Service.
The Seoul Global Center for foreign residents
Foreigners can turn to the Seoul Global Center, which provides information on daily life in several languages and offers specialised consultations. For a serious loan dispute, it is still better to consult a Korean lawyer or the Korea Legal Aid Corporation, depending on income.
Seoul, Incheon and the wider metropolitan area
Many Seoul residents live or work in the metropolitan area that includes Incheon and Gyeonggi Province. The rules are identical, but local risks differ, as our page on the peer-to-peer loan in Incheon, a port and airport city, shows.
Lending money in Seoul: the procedure to follow
- Clarify the real need, whether a jeonse deposit, studies or costly debt, then limit the amount to what the lender can lose without hardship.
- Check the other party's identity at a meeting in a public place in Seoul and write down their home address.
- If the loan funds a jeonse deposit, consult the property register for the flat to spot any mortgages or seizures.
- Draft a bilingual IOU, Korean-French or Korean-English, signed and dated, with an interest rate below 20%.
- Send the money by transfer from a Korean bank, clearly marking the payment reference as a loan.
- Keep proof of every repayment received and prepare the interest declaration with the district tax office.
What a private loan costs in Seoul
| Item | Indicative figure in won | Comment |
|---|---|---|
| Agreed interest | At most 20% a year | That is no more than 200,000 ₩ a year for 1,000,000 ₩ lent |
| Tax withheld on interest | 27.5% of the interest | 25% national tax plus 2.5 points of local tax |
| Notarial authentication | Variable | Ask a Seoul notary office for a quote |
| Property register search | Modest cost, to be checked | Essential before a loan linked to a jeonse |
| Fees demanded by a stranger | Money lost | A sign of fraud, report it to 112 |
Documents to prepare for a loan in Seoul
- Identity card or alien registration card
- Bilingual IOU signed by both parties
- Property register extract (deunggibu deungbon) if a jeonse is being financed
- Copy of the jeonse lease concerned
- Statements of the fund transfers and repayments
- Dated and initialled repayment schedule
Common traps for Seoul residents
- Handing a jeonse deposit to an unknown middleman who promises to invest it for a high return: the money can vanish with no recourse.
- Answering a refinancing text and paying off the old loan into an account supplied by the caller instead of the bank's official account.
- Lending your bank account or card for a commission: the police can prosecute you as an accomplice to voice phishing.
- Signing a document written only in Korean without understanding it, when a checked translation protects both the expatriate and the other party.
- Lending to a colleague with no due date or rate, which invites misunderstandings and a reclassification of the money as a gift.
Questions from Seoul residents about private loans
Can I borrow from my parents for a jeonse deposit in Seoul?
Yes, provided the arrangement is formalised: a dated contract, a realistic rate and regular repayments by transfer. Without this proof, the NTS may treat the money as a taxable gift. Also check the property register so family savings are not exposed to jeonse fraud.
Where can I check that a Seoul lender is properly registered?
Ask for its registration number and check it with the Seoul Metropolitan Government or the FSS, which publish information on licensed lenders. A refusal to give this number or a request for upfront fees is enough to reject the offer.
Must an expatriate in Seoul declare interest on a loan to a friend?
Interest received by a Korean tax resident is in principle taxable, whatever their nationality. An expatriate should also check the rules of their home country and the applicable tax treaty with an adviser before setting a rate.
What should I do after sending money to a fake lender in Seoul?
Call 112 or your bank immediately to ask for the recipient account to be frozen, then contact the FSS on 1332. Keep screenshots, phone numbers and statements: they determine the chances of recovering part of the funds.