Despite the increasing use of loanwords in Korean, the psycholinguistic differences between processing loanwords and native words remain understudied. This study compared the processing of loanwords (e.g., 세일즈맨) and native words (e.g., 영업사원) during Korean sentence reading using an online self-paced reading task with 96 native Korean readers. Results showed that loanwords were recognized more slowly than native words, and this effect was consistent regardless of the participants’ reading skills. This suggests a categorical distinction between loanwords and native words in the mental lexicon of Korean readers. However, no significant difference was found in sentence comprehension times between loanwords and native words, indicating that despite the difference in lexical processing, the use of loanwords does not necessarily hinder sentence reading.