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Borrowers also understand that restructuring is the last resort as there is additional cost attached to it. Photo: Mint
Borrowers also understand that restructuring is the last resort as there is additional cost attached to it. Photo: Mint

If you are getting a loan restructured, pay your EMIs on time

Experts said lenders will look favourably at borrowers who opted for moratorium but had not defaulted earlier

If you are opting for restructuring of a loan, it will be reported as restructured to the credit bureaus which will impact your credit score. But lenders may take a lenient view once the borrower starts improving the credit score by repaying on time, said experts speaking at the Mint Money Conversation presented by digibank by DBS last week.

“If that person has repaid well, you kind of believe that whatever happened in the past was temporary. The same thing will happen with restructuring, it will take some time post restructuring of loans to look at those customers, again, favourably," said Adheer Dhar, head, personal loan and fintech, Clix Capital.

Experts said lenders will look favourably at borrowers who opted for moratorium but had not defaulted earlier. There is this distinction in the minds of bankers to consider borrowers who were good at repaying pre-covid, said Anshul Swami, head, retail inclusion, RBL Bank.

Borrowers also understand that restructuring is the last resort as there is additional cost attached to it. “While broad guidelines have been issued, a lot of it is a function of what the customer is asking for. The customer also understands that it will get reported to the bureau as a restructured loan, which can impact them," said Swami.

Bankers also want credit bureaus to consider it as one-off event while calculating the score. “Bureaus will also figure out what is the best way to incorporate this event. My view is that this will be a determinant in future decision making because it was on account of lack of ability to pay. But we will have to come up with some kind of overlay given the circumstances," said Jasmeet Wadhwa, executive director and business head, consumer finance, DBS Bank.

Experts said extending secured loans may be possible, but unsecured lending may take some time. “In case of secured loans, there is collateral, but on the unsecured side, I guess restructured customers will be kind of avoided for some time." said Dhar.

So if you are planning to opt for restructuring, make sure you pay your EMIs on time.

renu.yadav@livemint.com

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