5 Smart Ways to Restructure Personal Loan Before You Default

Are you unable to pay your personal loan EMIs in a timely manner? You are not alone.

Data from RBI reports that the count of wilful defaulters has risen from 2,154 in March 2020 to 2,664 in March 2024. The amount they owed has also risen from Rs 1,52,860 crore to Rs 1,96,441 crore during these four years. [source – The Indian Express]

Don’t worry—there are methods to restructure your personal loan before default. But the intent is to take action in time. If you act early, you can better manage your finances, get out of penalty, and avoid being declared a wilful defaulter, which can seriously hurt your credit score and ability to borrow money in the future.

Here in this blog, we explore five intelligent ways to restructure your personal loan.

Is It Possible to Restructure a Personal Loan?

Yes, Banks and NBFCs also provide personal loan restructuring facilities to assist borrowers in paying their loans more comfortably. In case of short-term financial issues, restructuring will reduce your EMI or increase the repayment duration, allowing you to manage repayment with ease.

Ways to Restructure a Loan

Lenders can revise your loan in different ways, such as:

1. Extending the repayment period – Giving you more time to pay, which lowers your EMI.
2. Adjusting the principal amount – Reducing or recalculating the amount you owe.
3. Changing installment amounts – Making EMIs smaller to match your financial situation.
4. Modifying the interest rate – Lowering or adjusting the interest to ease repayment.
5. Using a combination of these methods – A mix of changes to make repayments more manageable.

Steps to Restructure a Loan

• Check Eligibility – The lender will review your finances to see if you qualify.
• Explore Options – The lender will suggest ways to restructure. You can pick what suits you.
• Submit an application – You must apply and provide required documents.
• Know the Credit Impact – The lender will explain how it may affect your credit score.
• Get Approval & New Terms – If approved, you’ll receive new loan terms. You must agree to them.

Restructuring can reduce financial stress. But act on time and understand its effects before deciding.

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Who is entitled for loan restructuring?

Lenders have specific conditions for loan restructuring. You may qualify if you meet certain criteria. Here’s what they look for:

• Financial Hardship – You must have a valid reason, such as job loss or business failure. Lenders will assess your situation to ensure the crisis is real and not a way to avoid payments.

• Good Repayment History – If you have been paying your EMIs on time for long time your chances of approval are higher. Lenders prefer restructuring loans for responsible borrowers.

• Timely Request – You should apply for restructuring before you default on more than one EMIs. Acting early shows that you are proactive about managing your debt, which improves the chances of approval.

• Lender’s Policies & RBI Guidelines – Your bank or NBFC will provide restructuring to you according to RBI guidelines. All lenders have their own policies, and some of them might be more strict than others.

Even if you fulfill these criteria, approval is not confirmed. It will depend upon the lender’s policy and how they evaluate your repayment capacity on the new terms and conditions.

Read Also: Employment Status and Tenure Requirements for Personal Loan Eligibility

What are the disadvantages of loan restructuring?

Restructuring will make your loan repayment simple, but it does come with a disadvantage. Here’s what you should consider before deciding:

• Higher Interest Cost – Increasing your loan period reduces your EMI, but it enhances the overall interest. This implies the overall expense of your loan will be more. 

• Credit Score Impact – Lender’s report loan restructuring to credit bureaus, which can lower your CIBIL score.

• Difficulty in New Loans – Restructuring may make banks and NBFCs see you as a risky borrower. This can reduce your chances of getting new loans. This can make it tough to get new loans or better interest rates later.

• Not Always Approved – Loan restructuring is not guaranteed. Lenders approve only genuine cases after checking financial records. If they believe you can repay without restructuring, they may reject your request.

Restructuring can give you relief now, but it may create challenges in the future. Compare all options before choosing restructuring. Try adjusting your budget to manage payments. Talk to your lender to find better terms. Look for alternative loans if needed. This can help you avoid long-term financial stress.

Does loan restructuring affect CIBIL?

Yes, restructuring impacts your CIBIL score. Lenders report it as a “Restructured Loan,” which reduces your creditworthiness. It signals financial distress to future lenders.

However, the impact is lower than a loan default. A default stays on your credit report for years and makes borrowing difficult. If you repay as per the restructured plan, your score can improve over time.

Conclusion

Personal loan restructuring is a smart way to avoid default and manage repayments better. Whether you choose tenure extension, refinancing, or settlement, always discuss with your lender before missing EMIs.

If you’re having trouble with your loan, knowing your restructuring choices can better help you cope with repayments. Although WeCredit does not have loan restructuring, we would like to give you useful information so that you can make wise financial choices. Keep yourself informed and be in control of your financial future.e