Buying a home is a long-cherished dream for anyone. But the long-term loan needed to buy a home can dampen your dreams. You may also run into financial troubles and face difficulties in paying your equated monthly instalments (EMIs).
If you are unable to pay your home loan instalments, you may talk to your bank. Loan restructuring is an option many distressed borrowers opt for.
What Is Loan Restructuring?
Borrowers may face issues in paying EMIs due to economic downturns, market fluctuations, financial emergencies, or job loss.
Loan restructuring allows them to get some financial relief.
In simple words, banks alter the terms of the loan agreement, allowing borrowers to pay back the money in a more manageable way.
Loan Restructuring Options
Restructuring a home loan can involve extending the tenure, changing the interest rate, or a combination of these approaches.
Changing the interest rate from floating to fixed can provide stability in monthly payments. Though, you can end up losing on lower interest rates if market conditions change.
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Extending the loan tenure will lead to lower monthly obligations. While it may reduce the immediate financial burden, in the long run, you may have to make more interest payments.
Banks can also offer a grace period during which no repayments are made. Some lenders may allow you to transfer the outstanding interest on the home loan to a different credit facility to your financial burden.
Loan restructuring does not reduce the loan amount you have to repay. It just makes adjustments in how you repay your EMIs.​
Factors For Loan Restructuring
Getting your loan restructured depends on several factors, such as your repayment history, financial stability, and reasons for seeking changes in repayment.
Lenders will require proof that you are facing financial hardship before they agree to make changes in the terms of the loan.
Changing the terms of the repayment may offer immediate relief. It allows you to avoid defaults and alters your repayment according to your financial situation. In the long run, it can lead to higher overall interest payments.
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Your credit score may also be impacted negatively for a while.
It is best to consult a financial expert or your bank before opting for a loan restructuring.
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