Our financial obligations – loans, payday loans, payday loans, credit cards and account limits – can at some point become difficult to pay off regularly. Then we can come across the procedure called loan restructuring. It sounds mysterious? Well, if you’re wondering what credit restructuring is, you definitely need to read our article. We invite you to read!
Credit restructuring. What is this process and what can I gain from it?
Life brings us unforeseen situations, and dealing with them can have a serious impact on our home budget and harm our liquidity. Let’s remember that every unpaid installment means that more money is left in the household budget, but unfortunately it is only apparent peace. In the next month, we already have two installments to pay, plus interest for the delay. Costs rise instead of falling, and repayment is getting harder. However, to avoid such problems and still be able to fulfill our obligations, we can reach for different solutions. One of them is loan restructuring. To adjust the repayment terms of the loans we take, we can choose from several solutions. What is loan restructuring and what forms does it take?
Credit holidays – in practice, the most commonly used procedure, which de facto means restructuring the loan. A bank or financial institution allows us for a short period – usually one to three months – in which we do not have to pay back installments, but interest on our debt is still accrued. Both the possibility and the final time of such credit holidays depend on many factors, among which the most important are the assessment of our financial standing, creditworthiness and a report in credit checker. What is the difference between credit holidays that we arrange ourselves without paying installments from those the bank agrees to? First of all, no debt collection process. If the bank knows about our intentions, it has agreed to it and relevant documents have been prepared for this – no penalty interest will be charged to us and we will not receive calls from the debt collection department. That is why it is worth agreeing with the bank and not acting on your own. All the more so because usually after three unpaid installments the loan agreement is terminated and the whole amount borrowed must be returned immediately – this is by far the worst solution possible.
Extending the repayment period
also a frequently used option, consisting in extending the time to pay off our liability. The longer the period, the lower the installment, and therefore easier to bear. Restructuring of a mortgage in this form is often not accepted by customers, because in this case there is higher interest for a longer time of financing. However, you should ask yourself: do we prefer to pay lower monthly installments and take a breather, even if the cost of the loan is higher in the end, or do you desperately look for funds to repay the next installment every month?
Consolidation of loans – if we have more than one liability, and repayment is more difficult for us, it is worth considering consolidation. The bank or loan company in which we apply for it repays our loans and divides the resulting sum into as many months as possible. The loan is restructured mainly due to the extension of the repayment period – the longer, the lower the single installment, which of course allows for easier payment.
Conversion of the loan – a risky option, but it can bring the desired results: by changing the currency of the loan to the one in which the interest rate is currently low, we gain paying less interest. Unfortunately, exchange rates are subject to large fluctuations, hence the whole operation may fail. The option exists, but it has been rarely used on the financial market for a long time. The situation with franc mortgage loans echoed so much that banks and other financial institutions do not undertake to grant foreign currency loans. Therefore, credit restructuring in this form has been suspended for some time.
Restructuring your mortgage, also known as refinancing your mortgage, is a separate issue. Usually, when we take out a loan to buy an apartment or build a house, we negotiate the best offer with the bank. The terms of our commitment – interest, margin, commission, amount of own contribution and other fees – depend on our creditworthiness and credit risk assessment.
Mortgage restructuring is a long process, but remember that it brings benefits for many years to come.
Therefore, it is also worth paying attention to the details that we can negotiate under the new contract, e.g. no commission for any earlier repayment, or free annexes to the contract, which may even involve changing the installment payment date. We repay the mortgage for so long that we should protect ourselves as much as possible against changes that may take place in our lives. Restructuring your mortgage is a good opportunity.