Debts can get out of hand. Most people in trouble with their loans find themselves confronted with some very unpalatable situations. The problem is usually that they’ve waited too long to deal with the issues created by loans getting out of control. The result is they undergo the debt collection process, and it can sometimes be a pretty grim experience.
It’s possible to avoid these nasty situations by debt rescheduling, which is basically a reorganization of the loan. Ironically, it’s also the preferred first option for debt recovery agencies, which are employed to recover money for lenders. Rescheduling is one of the best ways of doing that.
Rescheduling, The Basic Process
Rescheduling is pretty much what it sounds like. It's a rearrangement of the loan. These are the fundamental points about rescheduling and how it works:
The borrower asks the lender for an appointment to reschedule the loan.
The lender agrees to talk about rescheduling. (Note: In cases of major loan problems, this can be a sensitive issue with lenders. See below, "Managing loan rescheduling- When you know you’ve got a problem".)
- The loan repayments are changed to an agreed amount.
- The term of the loan is in some cases extended, to make allowances for the lower repayments.
- If the borrower has only taken out some of the whole loan, meaning only actually accessed a portion of the loan, the loan amount may be reduced, and some or all of the remaining funds returned.
- In some cases, a "break even" scenario, cancellation of the loan and simply repaying the outstanding monies, can be arranged.
Note: These changes involve alterations to the loan agreement, and it’s also possible that some charges may be incurred. The charges can be either paid directly or included in the revised repayments.
The Effects of Rescheduling
A rescheduled loan usually involves the borrower making lower repayments over a longer period of time. This produces several effects:
- The borrower paying more interest on the loan because of the extended time frame and lower repayments.
- The borrower’s budget being under less strain from repayment amounts.
- Protecting the borrower’s credit rating.
- Improving the borrower’s position with the lender. Rescheduling is the right thing to do from the lender’s perspective, too.
Managing Loan Rescheduling - When You Know You’ve Got a Problem
The real "trick" with loan rescheduling is knowing when to do it, and doing it ASAP, before you’re in real trouble, and looking at the debt recovery cycle.
These are the classic symptoms of a loan that need rescheduling:
- Constant budget issues caused by lack of free cash.
- Regular bill problems.
- Not much spare cash for any unexpected costs.
- Running on empty between paydays.
- Suddenly being very conscious of shopping budgets.
- Constant stress through cycles of money problems.
If the loan is in this condition, it can literally become a personal problem. Recent studies show that financial problems are often the cause of marriage and relationship breakups.
Rescheduling is the best, quickest, and safest option. The relief will be instantaneous. The best solutions are often the simplest. If you’re looking for a way out of a loan situation, start with rescheduling.
Tim Millett is an Australian freelance writer and journalist. He writes extensively in Australia, Canada, Europe, and the US. He’s published more than 500 articles about various topics, including Debt Collection and Debt Recovery.