Facts You Need To Know About Debt Restructuring
Debt rescheduling refers to restructuring the terms of an existing loan. When a borrower faces a temporary economic issue (liquidity issue, seasonal drop in sales, etc.) or another unforeseen event (accident, illness of the manager, natural disaster, etc.), they may be unable to fulfil payments or repay the instalments in time.
What is Rescheduling
Rescheduling, often referred to as debt rescheduling, is a way in which the repayment of debts may be reorganized. The borrower might be an individual, company, organization, or even a country.
Rescheduling, which is sometimes called loan modification, may be in the form of:
- A combination of lower interest payments but a longer period during which they are collected.
- Arranging for a later repayment date.
- Lowering the interest payments but raising how much eventually has to be paid.
- Negotiating a new loan (usually called debt restructuring).
- Aim is to provide the borrower with breathing space - relief
- Lender may need to accept that not all the money will be paid back
- May involve concessional rescheduling - reduction in the size of the debt
- Changing the original terms of a debt
