Everything to know about Loan Rescheduling - Capital Hills

If you are an entrepreneur and trying your very best to manage your capital for the business, you might have heard about loan rescheduling. But do you know how you can leverage it? If not, this article would be your ideal guide. We have tried to touch upon some of the important benefits that you can get from loan rescheduling. Let’s get started.

The impact of loan rescheduling

Affect on the credit score

A lot of consumers tend to confuse the terms of loan rescheduling and moratorium in regards to the credit score. While the credit score does not take a hit in the case of the moratorium, no clear announcements have been made for loan rescheduling. This implies that going with the option of loan rescheduling can directly or indirectly impact the credit score. Many may argue that the rescheduling can be reported as “restructured,” which does not lead to a direct fall in credit score. However, it’s important to understand that the lenders can take adapt a defensive approach while they deal with consumers having “restructured” in their credit history.

Rate of Interest

One of the most important aspects which should be studied while toiling with the option of loan rescheduling is the rate of interest. The users should understand the interest rate to be levied on the loan they are planning a rescheduling for. For instance, if the interest rate is lower on a new secured loan compared to the rescheduled loan, the users should take up a new loan with a longer repayment duration and lower EMIs. This allows the users to repay the loan relatively easily and save money from extra interest and improve the credit score.

Reduction in the borrowing capacity

If a consumer wishes to opt for loan rescheduling, the tenure for the loan is bound to increase. This implies that the consumer would have to compromise on the loan amount if they wish to take a new loan while the initial loan is active. This is simply because longer repayment tenure decreases the borrowing capacity. It is always advised to understand and plan the rescheduling after evaluating the future needs and borrowing requirements.

Applicable terms

Since the interest rates differ based on the type of loan and banks, the loan rescheduling options also come with different terms in different scenarios. The consumers have to show the bank how a particular situation has impacted their repayment channel and how much time they plan on taking to repay the loan. Since the situations can’t be the same, the terms also differ from bank to bank. The consumers have to work with the banks to ascertain the rescheduling terms while working on some predefined rules and conditions the bank may have. It is always advisable to completely understand the terms and conditions before opting for loan rescheduling, so it does not do more damage than good.

Extra Interest

A lot of consumers are under the impression that rescheduling the loan does not attract extra interest. While this may hold its ground in some cases, the banks can charge extra interest for the duration the loan is being rescheduled for. This increases the interest amount to be paid along with the tenure of the loan. It is advised to be sure of the future loan needs with a backup plan of repayment while loan rescheduling.

Alternative repayment options

Consumers should always evaluate their alternative repayment options before they choose to proceed with loan rescheduling. One such option to consider before loan rescheduling is liquid assets. The users can always liquidate their relatively less essential or low return generating assets to repay some amount of the total debt. This can be a really good option if the interest rate is more than the return a user had expected on the current investments. Many may argue that liquidating assets is not a viable option for repaying the whole debt. However, it is important to understand that even if the customer is able to pay some part of the total debt, it decreases the EMIs, the total duration of loan rescheduling, and saves money on the extra interest part. Hence, by understanding their assets and liquidating them, the users can minimize the problems loan rescheduling might cause.

End Thoughts

Now you must have known how to use this knowledge to your business advantage. However, it is natural of you to have still some doubts that an expert can only clear. If you think so, you need to consult Capital Hills Dubai, one of the leading experts in loan rescheduling and financial meditation domains.