Korea DSR Guide: How Banks Calculate Your Loan Limit
Learn which debts count toward Korea’s DSR, how the 40% ceiling works and why stress DSR can reduce a new loan limit.
DSR = annual principal and interest on covered debt ÷ recognized annual income × 100. A 40% ceiling means every covered loan must fit inside 40% of the income accepted by the lender.
DSR is an annual repayment budget. Existing loans use that budget before a bank sizes a new mortgage or credit loan. High income does not guarantee a high limit when other debt already consumes much of the available service.
A 40% DSR example
If the lender recognizes ₩50 million of annual income, a 40% ceiling creates ₩20 million of total annual repayment capacity.
The remaining ₩12 million is not the amount you can borrow. It is the annual principal-and-interest capacity available to the new loan. The lender converts that figure into principal using the rate, term and repayment method.
Which debts use the budget?
| Debt | DSR treatment |
|---|---|
| Mortgage | Annual principal and interest under the recognized schedule |
| Unsecured credit | Regulatory maturity and repayment assumptions apply |
| Auto finance | Covered annual payments reduce new capacity |
| Student or policy loan | Treatment depends on the current product rule |
| Card borrowing | Covered balances can enter the lender’s calculation |
This is why adding balances is not enough. Two borrowers owing the same principal can receive different results when the debt types, rates and recognized maturities differ.
What stress DSR changes
Stress DSR calculates the repayment burden at a higher assumed rate. That rate is used only for the limit calculation; it is not added to the rate charged on the loan. The higher assumption means less principal fits inside the same annual budget.
Four ways to improve the estimate
- Repay debt with high annual serviceThe biggest DSR consumer is not always the smallest balance.
- Document income properlyThe lender’s recognized income enters the formula.
- Compare termsA longer recognized term may reduce annual principal, subject to the rules.
- Use the stressed rateAn advertised-rate calculation can overstate the available loan.
Passing DSR is not loan approval
Loan-to-value rules, property eligibility, credit history, bank underwriting and product caps still apply. DSR is the upper repayment boundary, not a promise from the bank.
Frequently asked questions
What is Korea’s DSR formula?
Total annual principal and interest on covered debt divided by recognized annual income, multiplied by 100.
Do credit and auto loans count?
Yes. Mortgages, unsecured credit, auto finance and other covered debts can consume the same annual debt-service capacity.
Does stress DSR raise my actual rate?
No. It uses a higher assumed rate to calculate borrowing capacity; the contractual loan rate is separate.