Korean Law Demystified!

When Lending Money (in Korea)…


The worst scenario might be if: 1) you lend in the form of cash + 2) you just say “pay me back soon!” You should transfer the money via bank account and also draft a personal loan agreement (aka promissory note).

I. Why via Account?

Because you’ll need to prove you actually handed over the money. (In court, it is the lender who bears the burden of proof.) When transferring the money, you could also enter a short message such as “LoanToMike” to make it clear the money (being sent) is intended to be a loan.

II. Why an Agreement?

Because you’ll need to prove the money you handed over was a loan, not a gift or reimbursement. Entering a message such as the above is not really definitive proof the money (sent) was a loan. Definitive proof is a valid personal loan agreement. For what to include, see slide at the top.

III. Additional Comments

1. Have the borrower handwrite (not type) the document him/herself. Verify his/her identity, and try to retain a copy of his/her ID. You can also try to record the conversations between you and the borrower. (In Korea, it’s legal to secretly record a conversation to which one is a party.)

2. From a borrower’s perspective: ask for a receipt (영수증) upon any full/partial repayment. When drafting a new/updated promissory note, make sure the previous one is shredded. When making a partial repayment, specify (on the receipt) how the interest is to be handled.

3. Not all loans have to be paid back. Loans specifically made to finance illegal activity (or crime) need not be paid back. For example: 1) You knew full well the money was going to be spent on gambling (aka 도박자금), or 2) The money pimps initially “lend” to prostitutes (aka 선불금)…

4. Failure to pay back on time is not, in itself, a crime. It is a civil matter. It is a crime (i.e., fraud) only when the borrower had no intention (at all) of paying back. The courts look at the borrower’s overall financial situation + whether he/she had a job, etc. at the time money was lent.

5. You can ask the borrower’s spouse to pay back only if the money was used for everyday household things/affairs. For example, the money was used to pay their rent, etc. (e.g., For drinking and having fun –> no.)

DID YOU KNOW? A loan agreement is called “금전(소비)대차 계약.”


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