What is credit restructuring - a complete overview of the concept + 5 main stages of credit debt restructuring

Hello dear readers of Rich Pro! In this article we will talk about credit restructuring - what it is, what types of credit restructuring are, how you can restructure loan debt.

After reading the article to the end, you will also learn:

• for what reasons credit restructuring is carried out;
• who benefits from this procedure - to the borrower or the bank;
• what advice experts give regarding the choice of a bank;
• what you need to know before you make a debt restructuring on a loan.

At the end of the publication you will find answers to the most popular questions on this topic.

So, we are starting!

About what credit restructuring is and how to make credit debt restructuring, read in our issue

1. What is credit restructuring - a concept overview

Before you begin to study the theoretical foundations of restructuring, you should understand what is meant by this financial procedure.

Credit Restructuring - These are special measures applied to debtors who have found it difficult to pay a loan. In the process, it carries out a revision of the interest rate, as well as the size and timing of payments.

The essence of this procedure is to provide the borrower with certain benefits. The goal is to try to change the difficult situation and restore the possibility of payments.

If the borrower has difficulties that make it impossible to continue to make regular payments on the loan, he should not panic. Do not ignore the difficulties and think that the situation will improve by itself. Unfortunately, without active action, such problems are not resolved. If the borrower avoids communication with the lender when it is not possible to make payments, he behaves absolutely wrong.

The most correct solution for such difficulties would be to contact the bank. It is important to describe the situation as honestly as possible. Very often, the lender with this behavior of the borrower goes to meet him. As a result, you can get a proposal to conduct a restructuring procedure.

Most often, credit restructuring is initiated for the following reasons:

• illness or injury, as well as accidents that led to disability;
• the birth of children, leave to care for them or divorce, which entailed an increase in the level of expenses of the borrower;
• loss of the main source of income, including job loss, retirement, termination of business, delayed wages by the employer;
• change by the lender of loan repayment terms;
• if the contract is executed in foreign currency - a strong change in the rate.

The decision to restructure loan debt is always made individually. But for the bank to meet the requirements of the borrower, the reasons must be very serious. ☝Moreover, documents that confirm difficulties, as well as the current financial situation of the borrower, may be needed. But in some cases, restructuring is carried out by banks in order to generate income.

The procedure can be applied to not only individuals but also legal entities. Even states sometimes carry out debt restructuring. Similar to this procedure is refinancing orloan refinancing.

Often, restructuring is carried out after the court regarding the bankruptcy of an individual. In any case, this procedure affects the credit history of the borrower. However, you should not treat it exclusively as a negative process. Often, she is the only way to get out of the debt hole. Restructuring can help restore solvency.

2. Who benefits from restructuring debt on a loan to a bank or borrower?

Many are trying to understand: Is restructuring beneficial to debtors or is it beneficial only to the creditor (bank). In fact, most often this procedure gives certain advantages both the first and second:

• After the restructuring is completed, borrowers are given a pause that allows them to fix the financial situation;
• At the same time, the creditor receives payments on arrears, which are disadvantageous to him.

A banking organization is interested in minimizing the number of unpaid loans. This is also due to the fact that the supervisor of financial markets (Bank of Russia) requires the creation of reserve for impaired loans, as well as those for which payments are not received.

The creation of such a reserve is carried out from the net profit of the credit institution. Its value is quite large. The smaller the arrears, the smaller the amount you have to spend on creating a reserve. Ultimately, this will lead to an increase in net profit. Therefore, the restructuring of the loan is more beneficial for the bank than the recognition of its hopeless.

If you consider the procedure from the point of view of the debtor, he can get serious benefits. However, in practice, restructuring is rarely used.

In fact, if the borrower understands that paying the loan under the previous conditions becomes difficult for him, there is no point in waiting for the situation to worsen. It is better to contact the creditor, explain the situation and request a restructuring.

Banks, with the understanding that the situation is really difficult, often go towards their customers. They can change the payment schedule or reduce their size. By the way, in some cases, credit organizations themselves offer their clients the procedure in question. This is due to the desire to optimize cash funds.

To begin restructuring, the bank requires the following conditions to be met:

• serious financial difficulties for the borrower, which may become the reason for the procedure;
• the debtor in the past never allowed the formation of arrears;
• previously, the client did not use restructuring;
• borrower age does not exceed 70 years.

 Note: it is much easier to arrange restructuring in a credit institution for secured loans, eg, upon availability of collateral.

Given the attitude to the restructuring procedure, banks can be divided into:

1. Loyal banks often they write off penalties and fines from clients, after which they draw up a new loan agreement on more favorable terms. Despite the fact that you still have to make payments on the loan, this option is the most profitable for the borrower. However it makes sense to ask the bank for confirmation that the previous loan agreement has actually been terminated. This fact should be documented. To terminate the previous contract, a special agreement is drawn up, which is signed both by the bank and the borrower, or the certificate is simply issued to the client.
2. Hard banks are more categorical towards the client. Such creditors begin to threaten the debtor with debt collection through the judiciary and collection agencies, the onset of other serious consequences. Only if the client does not resume payments, he is offered to draw up a new contract. In this case, the loan amount increases by the amount of accrued interest, fines and interest. Of course, such conditions are not beneficial to borrowers. However, they can be used in situations where there is simply no other way.

If a bank refuses to conduct a restructuring procedure or offers unfavorable conditions, it may make sense to initiate a bankruptcy procedure.

The main types of loan debt restructuring

3. Types of credit restructuring - 7 main types

There are several types of credit debt restructuring. Most often, the choice of them is determined by agreement between the borrower and the credit institution. Much less often, the right of choice is granted to the client.

Below are presented the most common types of restructuring, which are used in most credit organizations in Russia.

Type 1. Credit holidays

When making a credit vacation, the borrower is allowed not to make loan payments for a certain period of time. The opportunity not to pay a loan can be provided for a period from several months to a year.

The reasons for registration of such a restructuring are most often:

• birth of a child;
• job loss;
• conscription for military service in the army.

Credit holidays are the best option for the borrower. During the absence of the need to make payments, the debtor manages to establish a financial situation. He can get a job, find other sources of income.

Worth considering! For banks, credit holidays are unprofitable. During this period, the financial institution does not receive absolutely any payments. Therefore, the considered type of restructuring is used extremely rarely.

One of the varieties of credit holidays involves the absence of payments on the principal debt, subject to monthly interest payments. In this case, you will have to continue to pay part of the debt. But in any case, it will be possible to get a respite and temporarily get rid of claims from the bank.

Type 2. Rate reduction

One of the types of restructuring is the reduction of interest on the loan. This option is possible for debtors with a clean credit history. Read about how to fix your credit history in one of our articles.

When using this type of restructuring overpayment amount does not change, and sometimes increases. However, the size of monthly payments is reduced, which helps to cope with financial problems.

Type 3. Writing off penalties and fines

Some credit organizations as a restructuring write off from borrowers forfeit, which represents the total amount of fines and penalties. Sometimes this type involves a delay in making such payments.

Keep in mind: Such restructuring can only be expected in extreme cases. Documentary evidence of serious financial difficulties or a court declaring a natural person bankrupt is necessary.

Type 4. Extension of the loan agreement

The extension or extension of a loan agreement implies an extension of the loan term. At the same time, the size of the monthly payment is reduced. 📛It is important to understand: such a restructuring leads to growth loan overpayments.

Prolongation can be a great opportunity to get a deferral of loan termination. In this case, payments are not canceled. Only the time period increases.

Type 5. Change in loan currency

Before the crisis, many borrowers issued loans in foreign currency. However, recently the rate has grown significantly⇑. As a result, it became almost impossible for most debtors to make payments on such loans.

Debt Conversion in rubles It turns out to be beneficial for borrowers. For the bank, this means losing part of the profit. That is why the type in question is used extremely rarely.

View 6. Reducing Payment Sizes

This option is very similar to prolongation, that is, an extension of the term. These two types differ only in the design principles of the procedure.

The use of the restructuring in question involves automatic loan extension. Moreover, the aggregate overpayment is also is increasing. This is explained by the fact that the borrower continues to pay interest on the total amount of debt.

View 7. Combined

This option involves a combination of elements of several types of restructuring. This procedure is quite complicated and is not formalized in all banks. There are serious reasons for using such a restructuring.

In this way, There are various options for restructuring a loan. They differ in terms of design and complexity of the procedure.

5 consecutive stages of credit restructuring

4. How to restructure loan debt - step by step instructions

Regardless of the type of restructuring, the procedure is carried out according to one scheme. Experts recommend that you study the algorithm in advance in order to make it easier to navigate the steps.

Step number 1. Filling in the questionnaire

You can get a form to fill out at the bank. It is not necessary to go to the department at all, you can find the form online on the site. The questionnaire contains information not only about the applicant, but also about the loan for which he wishes to complete the restructuring.

To assess the financial capabilities of the debtor, the bank requires information on the amount of its income, which is confirmed by the relevant certificate, as well as on basic expenses. It will be useful to indicate the list of property that is owned by the borrower.

In the section of the questionnaire, which is dedicated to the current loan, it is necessary to reflect amount of monthly payments, debt balance. In addition, it is of great importance reason for wanting to restructure. If you plan to formalize the procedure for a mortgage loan, additionally you will need to submit to the bank documents for real estate acting as a pledge.

We also recommend reading our article on mortgage refinancing.

Some banks allow you to specify how the borrower wishes to restructure. Of course, there are no guarantees that the wishes of the debtor will be fulfilled. However, in any case, the credit institution will take them into account.

Step number 2. Application form to the bank

At this stage, it is necessary to submit the completed application to the credit institution. This can be done not only by visiting the bank office, but also in online mode.

Step number 3. Communication with a loan officer

When the application is reviewed, the borrower will be invited to the bank branch. Here, in the process of communicating with a loan officer, the current situation is discussed, and the optimal scheme for restructuring is also selected.

Step number 4. Provision of documents

At this stage, it is necessary to provide the bank with a package of documents. Traditionally, it includes:

• loan restructuring application;
• original and copy of identity document;
• current loan agreement;
• documentary evidence of the current financial situation.

Download loan restructuring application - sample

Step number 5. Registration of a restructuring agreement

If the bank makes a positive decision regarding the restructuring based on the results of the consideration of the application and the submitted documents, a new contract is drawn up. It details the information about the restructuring scheme that will be used.

Take note: if participating in the original contract guarantor or co-borrowerrestructure without their consent will fail.

Before signing a new loan agreement, the borrower must not only carefully read it, but also make sure that the previous one is closed. Most often, in support of either signed agreementor the corresponding reference.

☝ Besides, during the restructuring, it is not worth signing the contract until a new payment schedule is presented to the debtor. It is important to make sure that the borrower can handle the payments.

If a credit institution refuses to carry out restructuring, experts recommend that the debtor request written reasoned confirmation of a negative decision.

In the future, if the bank sues the borrower, the availability of such a document can be very useful. If the court sees a desire to pay off its debts in combination with the bank’s lack of desire to meet them, it is quite possible that the decision will oblige the creditor to carry out a restructuring procedure.

5. How to choose a credit institution for restructuring - expert advice + review of TOP-3 banks

Restructuring of loans is often used by debtors to pay off an existing loan by issuing a new one. If the loan was obtained on unfavorable conditions, it makes sense to contact the same credit organization to take a new loan to pay off existing debt.

When choosing a bank where restructuring will be carried out, the borrower must take into account a number of criteria:

• credit organization reputation;
• the amount of the commission charged during the execution of the new contract;
• Bank policy regarding restructuring;
• conditions for the provision of a new loan.

It is not easy to make the right choice from a huge list of banks operating in Russia on your own. Therefore, it makes sense to refer to the ratings drawn up by experts. Below are presented 3 popular credit organizationswho are actively promoting the restructuring service.

1) VTB Bank of Moscow

VTB Bank of Moscow provides loan restructuring services, including those issued in other credit organizations. It is enough to submit an application so that the debt burden on the family budget is significantly reduced.

Bank offers restructuring civil servants on special conditions.

You can highlight a number of advantages of the bank compared with other similar organizations:

• the borrower can choose the most convenient date for making monthly payments;
• insurance is issued on a voluntary basis;
• the debtor can count on long credit holidays.

A restructuring application does not require a lot of time. After submitting an application and providing the necessary documents, the bank makes a decision within ¼ hours.

2) Sovcombank

Sovcombank is a unique credit organization that helps citizens who receive rejection at all banks. Contacting this company is the easiest, but at the same time reliable enough way to improve your credit history. Here, each client is provided individual restructuring program.

It is enough for the debtor to fill out an application via the Internet on the resource of a credit organization. After approval, it will remain to visit the office of the credit institution. Here, upon presentation of an identity document, you can arrange a restructuring.

Among the advantages of Sovcombank are:

• the possibility of reducing payments, increasing loan terms;
• preservation of the subject of pledge;
• registration of credit holidays.

3) Interprombank

Interprombank works in the market with 1995 of the year. Today, customers are offered a full range of financial services.

When making a restructuring in the bank in question, you can count on a number of advantages:

• the ability to combine any number of loans issued at any banks;
• the total amount of restructured loans may reach 1 million rubles;
• the opportunity to reduce the financial burden on the family budget.

To complete the procedure, it is enough to send an application online, after which provide the necessary documents and sign a restructuring agreement.

To compare the reviewed banks was easier, the main features of the restructuring in them are summarized in the table below.

Table: “TOP-3 popular banks for restructuring + terms of service”

📎 Read also the article on where to get a loan without refusal, even with a bad credit history without inquiries and guarantors.

6. Things to consider before performing a loan restructuring - tips and tricks 📣

Before starting a loan restructuring process, the borrower must understand why he is doing this. It is important to be aware of: whether the procedure will actually lead to an improvement in the financial situation.

In theory, a restructuring is designed to reduce the financial burden on the borrower and facilitate debt repayment.

In practice, it is far from always possible to achieve an improvement in the situation. Often, credit institutions convince debtors that it will become easier for them to repay a loan after restructuring. Such advertising assurances can lure the borrower into a serious debt hole.

If the debtor does not understand the financial and legal features of the restructuring, it may be in a situation where it becomes impossible to service the debt further. Ultimately, the situation can go to trial. The result will be a very unpleasant cooperation with the bailiffs, who will be transferred the right to claim debt from the borrower.

To avoid serious troubles, you have to be extremely careful in the procedure. In this case, the following points should be carefully analyzed:

• is it possible to write off fines if they are included in the total amount of debt, you can ask to reduce the amount or use a one-time penalty instead of a monthly penalty;
• what type of restructuring will be used is of great importance;
• Before signing the contract, the total amount of the overpayment should be calculated.

If until the end of the problem loan remains no more than six months, experts recommend not resorting to restructuring, but look for other options for paying off debt.

In fact, it is not easy for a person without special financial education to understand all the features of a restructuring. Often the conditions that a credit institution presents as the most favorable, in practice, are unbearable.

Often, banks completely refuse to restructure. At the same time, they refer to a damaged credit history and other circumstances. In this case, it makes sense to contact specialized organizations that help get a loan on the most favorable terms.

7. FAQ: answers to the most popular questions

In the process of studying information about the restructuring of people who do not have financial education, a huge number of questions arise. To save our readers time, we respond to the most popular of them.

Question 1. How is credit restructuring different from refinancing?

Many people believe that restructuring and refinancing are identical procedures. However, this opinion is incorrect. It’s important to understand what difference between these procedures, and what effect they have on the credit history. Only with full understanding can it be expected that the procedure will help improve the financial situation.

Refinancing and restructuring: what is the difference

Refinancing - This is a financial procedure when one loan is paid at the expense of funds received in the process of processing another. In other words, the opening of a new loan agreement with the simultaneous closure of the old.

Refinancing can be arranged both at the bank where the current loan is received, and at any other credit institution. There is an opportunity to carry out the procedure for several loans at once, even received at different banks. As a result, a large number of loans can be combined into one.

When refinancing, there is no negative impact on the borrower's credit history. The report will show that one loan agreement is open and another is closed.

Refinancing is a great way to reduce your debt burden. Borrowers who have certain financial knowledge and experience constantly analyze changes in the market situation. Bank lending conditions are determined by a large number of factors, including the size central bank key rate.

It should be understood: the credit institution in which the current loan was received has the right to refuse the debtor to refinance it. Even if the market situation changes, the bank is not obliged to soften credit conditions.

However, in such a situation, the borrower may apply for refinancing to another lending institution. If he has no problems with credit history, and he passes according to the requirements of the bank, an agreement will be drawn up on more favorable terms and the current loan will be repaid with the funds received.

Before going to refinancing, the borrower must carefully analyze all the conditions of the contract. Great importance should be given loan term, interest rate, as well as monthly payment amount.

✍ Should be considered, what some credit organizations set commission for registration of refinancing or for a certain period of time increase the interest rate. Therefore, before signing the contract, it is important to carefully read it.

No credit institution will want to see among its customers citizens with an unfavorable rating. Therefore, the decision on the application largely depends on the credit history of the debtor.

Unlike refinancing, restructuring is something else.

Restructuring - This is a change in the terms of the current loan agreement. The procedure can be issued in the current bank. Going to another will fail.

Most often, restructuring is resorted to when the borrower has serious financial difficulties and he can no longer service the debt on the same terms.

The method of restructuring is determined individually for each debtor, it can be:

• interest rate reduction;
• reduction in monthly payments;
• writing off accrued fines and penalties.

You should always carefully study the conditions. Each bank develops them individually. Far from always restructuring is beneficial to the client. Often, agreeing to visually favorable conditions, the debtor is faced with increase overpayments.

Many people care how restructuring affects credit history. It all depends on when the agreement on the procedure will be reached. If you managed to do this on time, only the loan closure will be visible in the credit report.

However, in most cases, restructuring is resorted to when the debtor is in a hopeless situation. Most often this happens when a loan is already past due. In other words, the credit rating of the debtor at that moment is already decreased. Naturally, this cannot but be reflected in the credit history.

To compare the processes of restructuring and refinancing was easier, we presented the main features in the table below.

Table: “Distinctive features of refinancing and loan restructuring”

 In this way, refinancing is carried out for a more favorable payment of debt. In contrast, restructuring is applied when you need to get out of the debt hole.

Question 2. How many times can you do a loan restructuring?

At the legislative level, there is no restriction regarding the number of appeals of the debtor to a credit institution with an application for restructuring. It turns out that for each loan agreement you can count on such a procedure.

However, it should be understood: if after the restructuring, the debtor continues to allow delays without serious reason, in the future he is unlikely to be able to rely on the procedure again. Most likely, the bank in this service simply will refuse.

Do not forget that absolutely all information about loans issued, as well as the quality of their services are reflected in borrower credit history. Detailed information is regularly sent by banks to credit bureau.

Lenders use the information contained in the credit report not only when issuing new loans, but also when applying for refinancing or restructuring. Therefore, after completing the procedure in question, it is important to observe the new schedule. This will keep the credit history at an acceptable level.

If the borrower has a really difficult situation, but the bank refuses to carry out restructuring, the lender may resort to other measures to repay the debt. Most often used for this purpose:

• demand ahead of schedule in full to pay off the remaining debt;
• transfer of a loan for collection to collectors;
• appeal to court.

Question 3. In what order is the restructuring of an overdue loan?

When making a restructuring of an already overdue loan, you should keep in mind: most banks do not write off fines, penalties and forfeits. As a result, the amount of debt under the new agreement increases by the amount of these payments.

In order not to aggravate the situation, before signing a restructuring agreement, you should carefully analyze it. If it turns out that the amount of fines is too high, the best solution would be to go to court. But to resort to such a measure should only be if the reason for the delay is quite serious. Moreover, the court will require documented evidence of financial difficulties.

If the situation is really serious, the decision will most likely be made in favor of the borrower. This usually happens when the reasons for the delay are job loss, serious disease, disability assignment etc.

Following the trial the bank may be obliged to extend the loan term and exempt the borrower from penalties. Only the principal amount of the debt will have to be paid.

If there are delays, the restructuring procedure will include the following steps:

1. restructuring application indicating the reasons for the financial difficulties encountered;
2. analysis of the submitted application by a credit institution, as well as the reasons indicated therein;
3. making a decision based on the results of the review;
4. Bank offers various types of restructuring to the borrower to reduce financial burden. For this, it is necessary that bank employees make sure that there are objective reasons for the deterioration of the financial condition of the debtor;
5. sending by the debtor to a credit organization of a package of documents, which is necessary for the restructuring procedure;
6. Preparation of a restructuring agreement by an employee of a credit institution. This agreement reflects the terms of debt repayment;
7. careful study of the contract by the borrower. Only after a thorough check does he put a signature on it.

If the initiator of the restructuring procedure is a bank, even if there is an overdue debt, the debtor has the right to agree to the conditions proposed to him or refuse them.

To make the right choice, you should calculate overpayment amount in case of consent to the restructuring. Also it’s important to clarify whether the penalty will be included in the total amount owed.

8. Conclusion + video on the topic

Restructuring is used when the borrower has serious difficulties that hinder the quality of debt servicing. However, before agreeing to a procedure, you should analyze how beneficial it is.

The situation should be studied from two points of view. One side, restructuring helps to cope with excessive financial burden. On the other hand, upon prolongation of the contract, the amount of overpayment increases substantially.

It is important to consider: in some cases, restructuring is the only right decision. She will help to avoid judgment. With timely execution of such a procedure allows you to maintain a positive credit history.

We advise you to watch a video about the credit history - how to find out and whether it can be fixed:

And also a video about what you should know about credit restructuring:

That’s all with us.

We wish all Rich Pro readers financial prosperity. If, as a result of debt servicing, payments become overwhelming, may you manage to complete the restructuring on the most favorable terms!

If you have any questions, comments or additions on this topic - write them in the comments below. Do not forget to share the article in the social. networks with your friends. See you on the pages of our online magazine!

Watch the video: What is DEBT RESTRUCTURING? What does DEBT RESTRUCTURING mean? DEBT RESTRUCTURING meaning (November 2024).