A debt restructuring case can ideally be the solution to financial problems. Borrowers who have overextended themselves with their loan commitments and are suddenly unable to raise the money for the monthly installments have the opportunity to get a grip on liquidity problems by means of debt restructuring. Debt restructuring in difficult cases can prevent debt counseling.
What happens when a debt is rescheduled?
Debt restructuring naturally does not mean that the debt is no longer there in the end. But with debt restructuring, on the one hand, it can be possible to save on borrowing costs if expensive loans are replaced by cheap loans. On the other hand – and this is usually the case when it comes to debt restructuring in difficult cases, the monthly charge can be reduced if, for example, the term of the loans is extended. In principle, it is always possible to reschedule existing loans. A problem can only arise if debt restructuring is to be carried out even in difficult cases. Banks are generally reluctant to buy a high risk. However, when a case is difficult, there is much to suggest that it is. This requires tact and instinct. A personal interview is often necessary to convince the bank.
It is often problematic when borrowers have become unemployed and can no longer afford the high burden due to the loss of income. It is also difficult when the Credit Bureau is already negative. In difficult cases, debt rescheduling is often only possible if additional security can be provided to the bank. A solvent guarantee in the contract can work wonders. Borrowers who have financial problems and want to reschedule should look for the appropriate collateral and provide it when they request it.
If the debt restructuring project fails
If, despite several attempts, debt restructuring cannot be carried out in difficult cases, alternative solutions are available. In principle, debt restructuring alone does not solve the financial problem, but rather postpones it. Anyone who has financially covered themselves with their loans and recognizes this before everything gets out of hand can turn to a free debt counseling service. Professional debt counseling is not just about organizing debt restructuring in difficult cases, but rather about really reducing the debt.
Debt counseling can ultimately lead to debt relief, while debt restructuring only plugs a hole by tapping another hole. Debt advisers come into contact with the creditors. They agree on deferrals or breaks, so that the debtor gains time. After that, he may be able to at least partially pay off his debts. A debt counselor is the better solution if borrowers are actually up to their necks. The debt rescheduling loan could probably only be taken out on very bad terms, so that the debt continues to grow due to the higher borrowing costs.
Debt restructuring should be carefully considered in difficult cases and is best handled professionally. In most cases, financial problems can only be apparently solved in the short term. If you as a borrower are unsure whether rescheduling is suitable to reduce debt, you should make an appointment at a debt counseling service and get competent financial advice there. Once you have gotten into the debt spiral, you usually cannot get out without outside help. Debt restructuring is usually not helpful because it does not solve existing problems, but only obscures them.