Debt restructuring, or debt repurchase, is a grouping of credits into one: the new loan is intended to ensure financial balance for the borrower or to finance a new project. When you refinance a loan, you are essentially creating a new loan for the borrower. On the other hand, restructuring a loan means the existing loan is kept, but modified for lower payments so a homeowner can afford to pay their monthly statements. Can you restructure all your loans?
The different types of debt restructuring
The restructuring of home loans is intended to take out a more advantageous loan to shorten the repayment periods or to reduce the monthly payments and thus breathe. The disadvantage in the latter case is that the cost of credit will increase if the remaining repayment period is small. The borrower will again pay interest which he has already paid. He must also provide in the restructuring operation for the payment of the penalties provided for in the contract for the early repayment of the capital remaining due. These penalties correspond to 6 months of interest or a maximum of 3% of the capital remaining due. The gain obtained must therefore cover these costs.
The restructuring of consumer loans is possible in the context of over-indebtedness, but not only. Any borrower may want to lower their monthly payments if their income has decreased, to maintain a certain standard of living, or if they wish to find cash to finance a new project. The maximum term of the new credit in this case is 12 years. The rate is also higher than that of a mortgage. It is therefore necessary to compare the different offers with a broker for example.
Among the various restructured loans, there may be a mortgage and one or more consumer loans.
Debt consolidation excludes home loans. It only concerns consumer loans and credit cards. Generally, it intervenes in the context of over-indebtedness, to avoid personal bankruptcy. Debt consolidation is difficult to obtain: the borrower’s credit rating must be good. The borrower therefore has an interest in not waiting for an over-indebtedness procedure to be initiated, or in not being prohibited from banking. Any filing at the bank will penalize him severely.