Home loan: Differences between refinancing and restructuring
Reduced interest rates: If market interest rates have significantly decreased since the time you secured your original loan, refinancing could allow you to benefit from a lower interest rate. Improved credit score: If your credit score has improved since the time you initially obtained the loan, you may qualify for more favourable terms. Change in financial situation: A positive change in your financial situation, such as an increase in income or reduction in debt, could make you eligible for better loan terms.
Current loan has high monthly payments: If you’re struggling with high monthly payments, refinancing with a loan that has a lower interest rate or an extended term can provide relief. Debt consolidation: Switching towards a home loan that can provide a top-up or additional funds is also a good option, especially to close multiple high-interest-rate debts. Home loan restructuring is the last-resort option as it is opted for when the borrower is no longer in a position to meet debt repayments on current terms.
It is a process that allows borrowers to modify the terms of their existing loan to manage their repayment more effectively. This is often an option given to borrowers facing financial difficulties. Here are some key points to keep in mind when it comes to restructuring of the loan.
Purpose: The primary purpose of loan restructuring is to help borrowers manage the repayment of loan principal and interest due. It is often used to avoid the risk of default on existing loans. Modes: Loan restructuring can be achieved through various methods such as extending the repayment period, changing the repayable amount, altering the number of instalments, adjusting the rate of interest, or providing additional loans.
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