Loan Restructuring

What if you can’t pay the loan? How not to pay interest on an overdue loan? The most likely way to gain understanding of the bank is to discuss the issue of loan restructuring before the debt arises. Find out what loan restructuring (including mortgages) is, what are the ways and conditions for restructuring a loan or an overdue loan, and what debt reduction services exist. It is quite possible that it is impossible to pay the next installment on the loan. And there may be many reasons for this: from loss of employment to unpredictable life situations, when there is a banal lack of money to pay the next installment. What is the best way to proceed in this case? After all, financial difficulties can be temporary, and the terms of repayment of the loan pass.

What can banks do in the process of debt collection?

There can be several ways out of this situation. But the variations depend on each individual case. After all, some debtors can easily borrow money from relatives or friends. Others, having received a loan against security (a car, housing, securities), agree to sell the mortgaged property. But, as practice shows, such options are not suitable for everyone. Therefore, debtors should look for a third and obviously more economically justified way.

This is the possibility of credit restructuring, which almost all domestic banks offer their clients. But here, too, there are a number of requirements to the debtor. There is no need to be afraid of these obstacles in advance, as silence about the problem with loan repayment can turn into more serious consequences. After all, banks have a separate approach to “problem” clients. Accordingly, they can use the following tools to collect debts:

  • penalties for late payment or non-payment of interest for using the loan and/or part of the loan;
  • collection of damages from the debtor for violation of monetary obligations;
  • securing the debtor’s monetary obligations by third parties;
  • securing the borrower’s obligations that arise from the fact of concluding a loan agreement;
  • applying to the insurance company for payment of insurance sums in case of bank’s risk insurance about non-repayment of the loan and interest on it;
  • collection of debts in a judicial procedure.

Standard restructuring schemes

It should be noted that such funds are not popular among bankers, and most banks, according to experts, choose mainly the way of pre-trial settlement of the debt problem. Therefore, the most successful way to solve possible problems with the bank would be to voluntarily apply to its representatives with an application and substantiate the reasons for the impossibility of payment (with the application of certificates about the disease or other documents confirming the problems with loan repayment). And, according to experts, the earlier it is done, the better. The first type of restructuring is an increase in the term of the loan.

The second type of restructuring is deferral of payments on the body of the loan or credit holidays. Each bank offers its own variant of such program – sometimes deferral is possible for up to six months, but most often – no more than three. Deferred repayment of the loan with its extension for a longer period is usually not applied, and may be an exception only if the client plans to sell some of his property, or receive income in the amount of the loan after a certain period of time and this is confirmed by documentation. At the same time, interest on loans is paid on a monthly basis, the bank does not give a delay in their repayment. You may also consider debt consolidation services.