Loan Restructuring Vs. Loan Refinancing

Posted on Monday, January 27th, 2025 | By IndusInd Bank

Navigating the complexities of personal finance can be challenging. When dealing with existing debt, there are two commonly discussed options – loan restructuring and loan refinancing. Both serve distinct purposes and can significantly affect your financial health. In this article, we will explore the differences between loan restructuring and loan refinancing.

Understanding Loan Restructuring

Loan restructuring is a process where the terms of an existing loan are modified to provide relief to the borrower. This often involves extending the loan tenure, reducing the interest rate, or offering a temporary moratorium on repayments. Borrowers facing financial difficulties typically use loan restructuring, making it challenging to meet their current loan obligations.

Key Features of Loan Restructuring

• Extended Tenure: The loan period is extended, thereby reducing the monthly EMI payments.
• Reduced Interest Rates: Sometimes, lenders may agree to lower the interest rates to make the loan more manageable.
• Moratorium Periods: Borrowers may get a temporary pause in repayments to recover from financial stress.
• Principal Reduction: In rare cases, part of the loan principal may be forgiven.

Loan restructuring is considered a last resort, aimed at avoiding default and providing the borrower with breathing room to stabilise their financial situation.

Understanding Loan Refinancing

Loan refinancing involves replacing an existing loan with a new one, usually on better terms. This process can help lower interest rates, reduce EMI payments, or even consolidate multiple loans into a single, more manageable debt. Borrowers who have seen an improvement in their credit scores or financial condition often pursue loan refinancing, making them eligible for better loan terms.

Key Features of Loan Refinancing

• Lower Interest Rates: Borrowers can take advantage of reduced interest rates, thereby saving money over the loan tenure.
• Shorter or Extended Tenure: Depending on financial goals, borrowers can choose to shorten or extend the repayment period.
• Improved Loan Terms: Refinancing can offer more favourable terms, such as lower fees and better customer service.
• Debt Consolidation: Multiple loans can be consolidated into one, simplifying monthly repayments and reducing financial stress.

Loan Restructuring Vs. Loan Refinancing: Key Differences

While both loan restructuring and loan refinancing aim to make debt more manageable, both are different. The differences include:

• Purpose: Loan restructuring is beneficial for borrowers facing financial hardship, whereas loan refinancing is for those seeking better loan terms. Either way, use a personal loan EMI calculator to get an idea of much you need to borrow and what your EMI would be like.
• Impact on Credit Score: Loan restructuring can negatively impact your credit score, as it indicates financial distress. Loan refinancing can positively affect your credit score if managed properly.
• Approval Process: Loan restructuring usually requires proof of financial hardship, whereas loan refinancing is often based on an improved credit score and financial stability.

How IndusInd Bank Personal Loans Can Help

IndusInd Bank offers a range of personal loan products designed to meet various financial needs, whether you are looking to restructure your existing debt or refinance for better terms.

Features of IndusInd Bank Personal Loan

• Flexible Loan Amounts: Borrow amounts ranging from ₹30,000 to ₹5,00,000, depending on your needs.
• Competitive Interest Rates: Benefit from attractive interest rates that make repayment easier, starting from 10.49% p.a.
• Instant Approval Disbursal: Enjoy fast loan processing and disbursal, helping you address urgent financial needs promptly.
• Minimal Documentation: Simplified application process with minimal paperwork.
• Flexible Tenure: Choose a repayment period that suits your financial situation, ranging from 12 to 48 months.

Eligibility Criteria

• Age: Applicants should be between 21 and 60 years old.
• Income: The minimum net monthly income of the applicant should be at least ₹25,000.
• Employment: Applicant should have completed a minimum of 2 years of employment with a minimum 1-year in the current company.

Also Read: Personal Loan Terminology – Important Terms You Must Know

Conclusion

Choosing between loan restructuring and loan refinancing depends on your financial situation and goals. If you’re facing financial difficulties and need temporary relief, loan restructuring could be the right option. However, if your financial condition has improved and you’re looking for better loan terms, loan refinancing might be more suitable. Either way, you need to look for a personal loan option that improves your financial situation.

IndusInd Bank offers personal loans that can cater to both needs, providing flexibility, competitive rates, and a customer-centric approach. Whether you’re looking to restructure your existing debt or refinance for better terms, IndusInd Bank’s Personal Loan can be a valuable tool in achieving your financial objectives.

Apply now for a Personal Loan with IndusInd Bank!

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.