Loan restructuring. Ways to get out of difficult situations

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

There are many different crisis situations in life, the consequence of which is the deterioration of financial opportunities. This may be the loss of a job, a serious illness, the disappearance of a source of income. And if, in addition to everything else, you need to pay off the loan, then it's time to go to the bank and agree on debt restructuring.

In the view of the borrower, this procedure is considered too complicated and bureaucratic. However, this is not the case. Sometimes restructuring a loan for a bank is the best way out of a situation with a borrower than turning to collection services or going to court. Especially if the borrower has a good credit history and does not refuse to repay his debt.

What is a loan restructuring

According to bank employees, the so-called "Workout tool" is a rather complicated topic of financial and mathematical relationships. Sometimes even experienced banking specialists "swim" in it. Loan restructuring is an opportunity to reduce the debt burden inin the form of a reduction in monthly payments. At the same time, the terms of the loan agreement are changed, where the fact of a concession or advantage to which the bank is going is fixed.

Restructuring schemes

At the moment, the bank uses several standard options for changing payments and revising the debt agreement. Extending the loan term is one of the typical schemes of a credit institution. In this case, the restructuring of the loan is possible only on the condition that the time limit does not exceed that provided for this product. So, for example, if a borrower has a car loan for 5 years, and the maximum allowed period is 7 years, then it can only be extended for 2 years.

The next way to facilitate payments is to defer the repayment of the amount of the loan body, or the so-called "loan holidays". In this case, each bank has its own program, which is designed for a period of 3 to 6 months. For a longer period, the contract is extended if the client expects to sell any property or receive income from it, which is documented. But in any case, if payments on the body of the loan are suspended, then the borrower must pay the interest regularly. Loan restructuring can be done by changing the repayment schedule. Or in this case, a combined method of repayment is applied (at the request of the client). Non-traditional methods of debt restructuring include a reduction in interestrates and the abolition of pen alties. The bank approaches each case on an individual basis.

Loan restructuring is an additional condition attached to the main agreement with the bank. And everything is signed strictly by mutual agreement of both parties. However, after the signing of the restructuring agreement, one should by no means relax. From this point on, the borrower and his loan are considered problematic. Of course, there will be no annoying phone calls, bailiffs will not visit, but in any case, the banking service for managing overdue payments will have such a client on the pencil.