What is the difference between Loan Rescheduling and Loan Restructuring?
Most people have this doubt regarding loan rescheduling and loan restructuring. If you too have the same doubt, this article would be your ideal bet.
What is Loan Rescheduling?
As the name suggests, loan rescheduling is defined as the practice of making changes to an existing loan tenure through permissions from the lending partner. A very rarely permitted move, it not only allows borrowers to pay back with a little more time but also results in a new revisioned monthly installment. Although this may seem beneficial to many, the extended time often incurs more interest in the principal amount. Therefore, in the end, you wind up paying much more than previously anticipated.
Similarly, certain authorities or lending parties may also ask for ridiculously high-priced charges before allowing the change. Thus, it is better to consult with a professional in such cases than carelessly making an expensive mistake.
Pros:
● More time to pay off the amount
● A great reduction in the monthly installment amount
● Best suitable for urgent case scenarios
● Reduces the chances of repayment failure
● Aids in greater savings for other expenses during the tenure period
Cons:
● Results in a higher rate of interest on the principal amount
● Higher overall payable amount at the end of the tenure
Now that we know what Loan Rescheduling is, it’s time to learn about Loan Restructuring.
What is Loan Restructuring?
On the other hand, loan restructuring involves changing the very structure of an existing loan in order to aid borrowers leverage from a better cash flow. This is done by making required changes to an existing payment method or terms and regulations after going through the customer’s application form. Not applicable to all cases, certain rules and regulations surrounding the context need to be fulfilled for a successful restructuring.
For instance, if a customer is currently making repayments through overdrafts, the same can be upgraded to term loans. Unlike the former process, term loans make certain that there are greater savings and enough money to spend on other expenses. However, similar to loan rescheduling, you might be required to pay additional charges for availing of the opportunity.
Pros:
● No changes in the existing rate of interest or overall payable amount
● Allows regular cash flow for enhanced savings
● Doesn’t affect credit report standing
● Has no negative effects on future loan applications
Cons:
● Comparatively pricey than opting for loan rescheduling
● Additional legal costs and charges are a drawback
Now let’s understand the core subject matter- which one is better?
Which one of the two is a better option?
While no wonder both the procedures are given aid, proper planning and consideration are absolutely necessary before jumping to conclusions. Mindlessly choosing anyone can lead your credit to stand into an imminent threat by being tagged with red flags from lenders. Apart from this, you will also be needed to calculate additional charges or go through the modified terms and conditions before signing up for the new agreement to avoid last-minute mistakes.
Rescheduling or restructuring loans both put a considerable dent in your credit report and hence can be seen as a concern by future lenders. Therefore, financial experts advise avoiding both the choices until and unless the situation is too urgent or demanding. Thus, it is better to consult with a professional in such cases than carelessly making an expensive mistake.
How to reschedule or reconstruct a loan?
A procedure practiced by concerned lending parties only, you will have to get in direct contact with the authorities. While the majority of lenders would be happy to reach out to your loan rescheduling or restructuring applications directly, others might need you to make a prior appointment. Similarly, it is also essential to remember that not at all cases would be allowed such relaxations, and hence ensuring you fall into the category is a must before sending out the requests.
Once applied and reviewed successfully, the lending party would eventually send out a response letter to the borrower asking them to submit their plan of repayment. However, generally, Government banks and registered authorities arrange a practical meet-up to discuss the case further and reach an agreeable decision from both parties. During this process, depending upon the option availed, you will have to make an additional payment for legal purposes, after which the process is applied to the existing loan type.
End Thoughts
If you’re still unsure how to deal with it, consider taking help from an expert from Capital Hills Dubai. It is one of the best debt management companies in the UAE. You will get timely and efficient advisory for debt and delinquency to keep yourself out of any financial trouble.
