The main purpose of loan restructuring is to improve the borrower’s financial standing. Restructuring can be useful if the borrower loses his job or his income drops. However, it should be remembered that the bank may not be willing to suggest solutions, which may result in refusing to restructure the loan. You can reduce the risk of such a situation by correctly preparing a loan restructuring application and providing it with good reasoning.
What is loan restructuring and when should it be used?
Debt restructuring is a change in the terms of an existing commitment. The loan is being restructured to allow the borrower to repay it. It happens that after some time after signing the loan agreement, the borrower’s financial conditions change. The most common situation is job loss or a change to a less-paid job. The lower remuneration of the borrower can effectively prevent repayment of the loan in accordance with the repayment schedule prepared for the contract. Loan restructuring can also be useful in the opposite case. If the lender has a much higher income than when the contract was made, he may be interested in reducing the number of installments and paying the debt faster.
The moment of submitting the loan restructuring application is very important. Most often it consists of people whose financial situation has already deteriorated significantly. It is worth remembering to start the procedure as soon as possible. If it is expected that there is a high risk of deterioration of the financial situation, then it is worth making a restructuring proposal without waiting for the actual deterioration of repayment possibilities. Thanks to this, the bank will look more favorably at the borrower.
The most common forms of loan restructuring – what can you apply for?
By far the most popular subject of restructuring applications is a change in the schedule of installments . Increasing the number of installments, i.e. extending the loan period, will reduce the amount of the monthly installment. The consequence of this will be an increase in interest, translating into higher total loan costs.
Credit holidays are another form of restructuring. This is a period during which you can not pay back installments, it is a kind of “freezing” of the loan. Often, however, this facility also involves increasing interest.
People with very serious problems with loan repayment can apply for refinancing. It involves taking a new (consolidation) loan to repay previous debt.
A popular subject of debt restructuring is applying for currency conversion.
How to write a loan restructuring application?
The most important elements of the debt restructuring application include the postulate and its justification, i.e. argumentation. The justification for the loan restructuring application should be supported by as many attachments as possible. To this end, depending on the problem, you need to prepare certificates – e.g. about job loss or a serious accident preventing you from working (hospital confirmation).
Presentation of the borrower’s situation is the most important, but due to the completely individual nature of each case, it is difficult to clearly indicate universal advice on how to write a loan restructuring application. You should write to the bank in an official, detailed manner and confirm your message with documentation. The loan restructuring application prepared in this way will have a better chance of being considered successfully.