Loan Restructure
Loan Restructure is the process of modifying the terms of an existing loan to accommodate changes in a borrower’s repayment capacity or lending requirements. Restructuring may involve changes to the repayment tenure, interest rate, repayment schedule, principal amount, or the treatment of outstanding interest and charges.
In Frappe Lending, Loan Restructure enables users to revise the terms of an existing loan while automatically generating a new repayment schedule based on the updated loan conditions.
Did You Know?
Loan restructuring allows lenders to modify loan terms without creating a new loan, helping borrowers continue repayments under revised conditions.
Accessing Loan Restructure
To create or manage loan restructures, navigate to:
Home > Lending > Loan > Loan RestructureCreating a Loan Restructure
Follow these steps to restructure an existing loan:
- Open the Loan Restructure List.
- Click on Add Loan Restructure.
- Select the required Loan Account.
- Enter the Restructure Date. Existing loan details are fetched automatically.
- Update the required loan terms, such as:
- New Loan Tenure
- New Interest Rate
- Treatment of pending interest and penalties
- Adjustment of security deposit towards principal, if applicable
- New Repayment Start Date
- Save the restructuring record.
- Review the newly generated repayment schedule.
- Submit the Loan Restructure after verification.
Note
A new repayment schedule is generated automatically using the updated loan terms after restructuring.
Information That Can Be Modified
| Loan Attribute | Description |
|---|---|
| Loan Tenure | Modify the remaining repayment duration of the loan. |
| Interest Rate | Update the applicable interest rate for future repayments. |
| Repayment Start Date | Define when the revised repayment schedule should begin. |
| Pending Interest and Penalties | Specify how outstanding dues should be handled during restructuring. |
| Security Deposit Adjustment | Optionally adjust the available security deposit against the outstanding principal. |
Capitalization of Due Interest and Charges
During loan restructuring, users can choose how pending accrued or unbooked interest and charges should be treated.
| Option | Description |
|---|---|
| Add to First EMI | The outstanding interest and charges are included in the first repayment after restructuring. |
| Capitalize | The outstanding interest and charges are added to the loan principal, resulting in a revised principal amount. |
Benefits of Loan Restructure
| Benefit | Description |
|---|---|
| Flexible Loan Management | Modify loan terms without creating a new loan account. |
| Updated Repayment Schedule | Automatically generate a repayment schedule based on revised loan conditions. |
| Outstanding Balance Management | Control how pending interest, penalties, and charges are handled. |
| Borrower Support | Help borrowers continue repayments through revised loan terms. |
Best Practices
- Review the existing loan details before initiating restructuring.
- Verify the revised repayment schedule before submitting the restructure.
- Choose an appropriate method for handling outstanding interest and charges.
- Document the reason for restructuring as part of the loan records.
- Confirm that revised loan terms comply with organizational lending policies.
