The average borrowers in our country are citizens, whose monthly income on average is about 30 thousand rubles for a family of three. Therefore, loss of employment, illness of a family member or other difficult circumstances prevent a person from paying a loan. A way out of this situation could be debt restructuring.
What is a loan restructuring?
Restructuring is a term mainly related to the banking sector, but it can also be found among the basic terms on loans . It means a change in the terms of debt repayment due to a deterioration in the financial situation of the borrower, and implies a reduction in the credit burden. Simply put, when a person is faced with financial problems and cannot repay a loan on time, he has the right to turn to the creditor with a request to revise the terms of the contract. If the borrower finds himself in a debt trap and goes through a bankruptcy procedure , a financial manager can turn to the lender to help the debtor solve his financial problems.
Restructuring is a chance to avoid loan delinquency and maintain a good credit history. But unfortunately, MFIs are not always ready to meet customers and rarely decide to take such measures. The borrower must try very hard to prove to the company that, indeed, due to its circumstances, it is not possible to repay the debt. It will be necessary to collect a large package of documents confirming your insolvency and submit them for consideration by MFI employees.
However, sometimes there are cases when the company itself offers the borrower to undergo a restructuring procedure. But more often this happens before the sale of debt to collectors or before the transfer of the case to court. As a rule, by that time a huge amount of penalties under the loan agreement has already been accrued: fines, penalties and accrued interest. Therefore, do not wait until the lender offers you to undergo such a procedure, and ask about it yourself as soon as possible. And remember that if the case has already reached the court with the MFI , then there can be no restructuring.
Types of loan restructuring
Today, microfinance organizations for “indebted” and those who have scored several loans at the same time and now cannot cope with the credit load, offer several forms of restructuring at once.
The first form of restructuring and the most used – the extension of the loan . The use of this form provides for the possibility of extending the payment of debt. This means that the amount of regular payments will decrease, but the loan will be more expensive as the period increases, and hence the total amount of interest accrued.
Sometimes they use the second form of restructuring – “credit holidays” – the borrower is for some time completely exempted from payments or only interest is paid. The “credit holiday” time is no more than two weeks, but sometimes MFIs, given the difficult circumstances of clients, agree to extend them to four weeks.
And the last possibility of restructuring is a change in the currency of the debt under a loan agreement. For the borrower, such restructuring will be beneficial only in the case when the foreign currency in which the loan was issued begins to grow rapidly in relation to the ruble. For obvious reasons, this method is not very popular among Russian MFIs and is used very rarely.
Who can apply for restructuring?
Unfortunately, MFIs, in comparison with banks, are much more likely to refuse to restructure their loans to their clients. This is due primarily to the fact that the amount of loans issued in microfinance organizations is much lower than in banks, as well as a shorter period for which contracts are concluded. Therefore, if you contact the MFI with a request to change the terms of the contract and expect a positive decision, then the circumstances should be really weighty, and the loan should be long-term .
The method of receiving money does not matter: the borrower received the necessary amount online, or made a loan without a bank card – you can apply for restructuring anyway.
A request for restructuring a loan online or a cash loan may be made by borrowers who:
- have a good credit rating
- can provide a rationale and documentary evidence of the inability to make payments on the debt,
- have evidence that the debt will be paid later or on time, but in smaller amounts.
In this case, the borrower must offer his way out of the situation and explain in what way he plans to repay the debt further. This is an ideal solution for debtors in the army or in prison – a delay of a loan even for a few weeks will help find a way to pay the loan obligation.
Only certain categories of borrowers can change the terms of loan payments:
- lost their jobs
- who were detained or reduced wages,
- entrepreneurs whose income has decreased
- clients who have serious health problems
- retirees or students who are delayed payments.
Relatives of the debtor in prison may apply for a review of payments. It is also possible to restructure loans in the period of a sharp devaluation of the ruble for borrowers on foreign currency loans.
How to arrange a loan restructuring?
To apply for a loan restructuring, you need to submit a corresponding application to the MFI. Such an application is better to submit immediately, as soon as you realize that you are not able to pay the debt on time.
All documents confirming your insolvency should be attached to the application:
Copy or original workbook,
✔ official certificate confirming the status of the unemployed,
✔ medical certificate of serious illness
✔ certificate of income for the last 2-3 months.
Also, do not forget to specify the desired form of restructuring. We advise you to contact financial institutions on time, even before the arising of delays and situations when the bailiffs came to describe the property and collect the debt . The chances of getting approval for restructuring the most from respectable borrowers.
I would also like to pay special attention to the fact that even in the case when all the necessary documents are provided and you prove that you really have good reasons for which you do not pay for the loan , you may be denied restructuring without giving a reason. This happens if the loan agreement was executed in the IWC. Most likely, you will not be able to achieve a change in the decision on your request, since microcredit companies carry out their activities under a simplified scheme, and less stringent requirements are placed on them than on other microfinance organizations. It is more likely that your debt will be sold to collectors , and the question will be closed. But if you have entered into an agreement with a microfinance company, then if you refuse to restructure your loan, you can safely file a complaint with the MFI or make a written request to resolve the conflict to the financial ombudsman .