The financial situation in Eastern Europe, especially Ukraine and Russia, has deteriorated sharply over the past two years. Such circumstances directly affect the ability of people to repay loans. Banks often meet customers who have problems paying monthly payments. Restructuring loan debt, the application for which the client writes, is a chance to save the financial situation in the family.
What is a credit installment plan?
Restructuring is a procedure in which the bank revises the terms of the loan (loan term, interest rate, monthly fee, monthly payment amount). Under what circumstances is a loan debt restructuring possible?
The economic situation leads to a deterioration in people's lives. Increasingly, there are cases of non-payment of wages, the unemployment rate in vast territories is growing sharply. As stressed by competent specialists, restructuring of credit debt is possible only if there is a situation of a real deterioration in the standard of living of the borrower, which can be documented.
Of course, this procedure is unpleasant. That is why, already when applying for a loan, a person should find out in detail from a specialist on what conditions restructuring of loan debt in this organization is possible.
How to convince the bank of financial difficulties?
To get a deferment or restructuring of the loan, you have to work hard. A bank is an organization that won’t take a word, so the client must provide documentary evidence. Why? Because cases of abuse by customers of the opportunity to reduce the monthly loan payment have become more frequent. Debt restructuring in the bank is available only to those people who are really in a difficult life situation.
The borrower must contact the bank branch and submit an application for debt restructuring there. This document should be drawn up in the name of the head of the branch, department. In some cases, if the restructuring of loan debt in a particular case is in doubt, the application will be considered by the central office of the financial institution. In this case, the head of the bank's board becomes the addressee.
Documentary evidence of customer insolvency
What documents should the client submit with the application? It all depends on the situation that has developed in a person in the family. For example, a borrower or close relatives were hospitalized. In this case, a certificate from the medical institution is provided with a diagnosis and an indicative amount required for treatment. In an unstable situation at work, a person brings a certificate in which the dynamics of a decrease in income is clearly traced.
Most often, problems arise when paying a loan to people who have suddenly lost their jobs. It is impossible to predict such a situation. A person has a well-paid job, so he can easily allow him to take a car on credit. For several months, contributions are paid, restructuring of debt on the loan is not needed. But suddenly the situation in life worsens sharply, a person loses his job ... The only way out of this situation is debt restructuring.
Who will not be able to get a restructuring?
When checking the documents of a client who needs debt restructuring, the bank’s security service will always be able to identify those who can really do without this procedure.The fact is that there are often situations when a client wants to make a restructuring without experiencing special financial difficulties.
For example, an individual has got money that would be nice to invest in business development or real estate acquisition. When calculating the balance, it turns out that if the profit from the project is received, then only after a few months. The client decides to contact the bank for a deferment of his loan obligations. Note that the bank very carefully checks the documents submitted in order to receive payment benefits or credit holidays, therefore, if such a case is detected, there will be a refusal.
Also, clients with a bad credit history cannot rely on restructuring. The bad reputation of a person in a bank can only be associated with delays that he had had on this loan before. Why is that? A bank will never issue a loan to a client who has a bad credit history on past loans.
Credit Debt Restructuring: Process Steps
I would like to emphasize right away that the bank decides to provide preferential payment terms on a loan not always quickly. That is why it is impossible to delay the notification of the bank about the difficult financial situation in the family. Also, the client, if he does not want to make an appointment with the bank manager, can send a letter on debt restructuring, in which all important documents are also attached.
After the client has notified the institution about the situation, the documents are checked by the security service. Without the approval of the Security Council, there can be no positive answer even for the most conscientious person, because the bank wants to return its money without problems and make money on it. After the approval of the security service, the decision is made by an authorized employee or board of bankers. It takes some time to review the documents (usually a week or two). In the case of a negative response, the bank sends an official letter to the borrower, which clearly indicates the reasons for the refusal.
If the answer is yes, the representative of the financial institution calls back to the client and makes an appointment. The bank and the client agree on the conditions and sign a debt restructuring agreement. The agreement comes into force immediately after its signing. Also, the manager, when he will contact the client by phone, may ask for additional documents that need to be added to the loan business.
Additional documents for loan debt restructuring
They provided a full package of documents for consideration to the bank, and the manager asks to bring some more papers? Do not despair! In such a situation, a positive solution to your question by creditors is almost guaranteed. So, the bank may additionally require:
- a certificate from the borrower's place of residence on the composition of the family;
- copies of all pages of the passport (a document replacing the passport) of the borrower and all family members;
- a photocopy of the client’s work book (in full);
- The original loan agreement that was issued to the client when applying for a loan.
These documents are necessary for the bank for absolute confidence in your reliability as a client who wants to repay the loan.
Loan extension
The practice of debt restructuring in the bank is very common, therefore, over the years of its implementation, many ways to solve customer problems have been developed. We consider in detail the main ones.
Extension of the loan agreement (the repayment period is getting longer) is a very convenient way. The remaining debt, which was established at the time of the client's request for help, is taken into account. When using this method, the maximum extension period, according to the law, is 10 years.
Customer Benefits:
- salvation in times of crisis;
- monthly payments become much less;
- possibility remains early repayment of the loan.
Bank Benefit:
- maintaining a good reputation of the bank in front of a client who has temporary difficulties;
- the bank is guaranteed to return its money;
- the interest on the loan will ultimately be higher than originally expected.
Can I change my billing rules?
Changing the method of calculating the monthly payment is also a real restructuring method. In lending practice, two main methods are used:
- from larger to smaller;
- annuity (equal installments throughout the entire loan repayment period).
If the restructuring of credit debt is necessary in the first months or years after receiving a loan, it will be rational to change the method of payment of contributions to annuity. This will lead to a decrease in the amount of the monthly loan payment. This option also guarantees mutually beneficial cooperation between the bank and the client.
Other ways to solve problems with the bank
- Decrease in the interest rate on the loan. This option is rarely used. The benefits for the client are obvious because the loan is repaid faster. The Bank makes such concessions because it understands the plight of the client. In addition, the managers of a financial organization are aware that in a problem loan, the main thing is not to earn as much as simply returning the money invested by the bank.
- "Credit holidays" - a way to restructure loan debt, in which the client does not repay the loan body for several months. At the same time, the bank does not exempt the client from the monthly payment of interest for using it. Such a delay is beneficial only if the client is 100% sure that his financial situation is stabilizing over the next few months. After the end of the credit vacation, several possible scenarios are possible:
- breakdown of debt for a specified period with payment of contributions on an annuity basis;
- sometimes a method is used in which, after the extension of the deferral of payment of the loan body, the interest rate rises.
- Change of loan currency. In the conditions of modern fluctuations in the exchange rate, this method can be beneficial for the client only if the loan is transferred from foreign currency to ruble. The option of converting a currency from ruble to dollars is not suitable, because the client may be even more difficult if the ruble falls further.
The client signs a debt restructuring agreement with the bank.
Which restructuring method is more profitable?
When choosing a banking institution for lending, the client should consult with the manager how the bank solves problems with delays in paying loans. It is better to choose the institution where you can choose the option of debt restructuring.
Let's try to analyze. Each of the methods is interesting in its own way. It is always worth deciding, knowing the specific circumstances of the family. Based on experience, the most optimal method of restructuring credit debt is the extension of credit debt. We add that you should beware of making a replacement for the loan currency.
Consequences of loan default
If a client begins to have problems with paying a loan, then it is better to solve them with the bank peacefully. Credit debt restructuring is the best way to solve financial problems. In the event of a long delay, the bank’s security service will be involved in the loan first. Employees will try to achieve repayment of the debt, because the main task of the bank's representatives is to protect the interests of the company.
If the client does not continue to repay the loan, the bank will transfer the matter to the collection company. Collectors have far more rights than employees of a financial institution. These firms use far from the cleanest methods in their work, therefore it is better to cooperate with the bank.
