Loan restructuring
Restructuring changes the terms of a loan — a longer tenure, a smaller instalment, a pause, or interest added to the principal — so that you can keep paying and the loan stays alive. It is the lender’s decision, based on whether your difficulty is temporary and your income can support the new terms. It is usually better for your credit record than default or settlement, but it is not free.
What can change
- Tenure — extended, so each EMI is smaller. Total interest rises.
- Instalment — reduced for a period, then stepped up.
- Moratorium — a pause on principal, sometimes on interest, for a few months. Interest usually keeps accruing.
- Interest capitalisation — unpaid interest added to the loan and repaid over the new tenure.
- Conversion — for businesses, part of a working-capital limit converted into a term loan.
How to ask
- Ask before you miss payments, or as early as possible after. Lenders respond better to a request than to silence.
- Write to the lender: what happened, why it is temporary, what you can pay from when. Attach proof — job loss letter, medical papers, business figures.
- Propose specific terms: tenure, instalment, start date.
- Get the lender’s decision in writing, with the full revised schedule and any fee.
- Keep paying whatever you can while the request is being considered.
What to check in the offer
- The new EMI and tenure, and the total you will now repay over the loan.
- Any restructuring fee or higher rate.
- How the account will be reported to the credit bureaus — ask specifically.
- What happens if you miss a payment under the new terms.
- For secured loans, whether any additional security is being asked for.
Questions about restructuring
Is there a right to restructuring?
No. It is the lender’s decision under its own policy and RBI’s framework. Special RBI schemes have applied at particular times (for example after natural calamities); ask whether one applies.
Will restructuring affect my credit score?
A restructured account is usually flagged as such on your report. It is generally read more favourably than a default or settlement, but it is not neutral. Ask the lender exactly how it will report.
Does the total cost go up?
Almost always, because interest runs for longer or is capitalised. Compare the new total against what you can afford.
Can a loan be restructured more than once?
Rarely, and lenders treat a second request with more caution.
Can an NPA account be restructured?
Yes, but the lender’s process is stricter and the account may remain classified as NPA until you pay satisfactorily for a period.
What if the lender refuses?
Ask for the reason in writing. Consider whether a settlement, a balance transfer (if you still qualify) or selling an asset is realistic. Use the grievance channel and, after 30 days, the RBI Ombudsman if you believe the lender has not followed its own policy.
Should I stop paying while I wait?
No. Missed payments during the request weaken your case and add charges.
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