What Is The Difference Between Loan Rescheduling And Loan Restructuring

There is not much difference between the two terms when you just read it. However, there are key differences between both. 

Rescheduling of loans means to extend or add extra time to your existing loan tenure, resulting in a revision of your monthly instalment amount so that you may be able to pay a lesser amount each month. This can help the borrower buy some time to adjust the repayment plan and also not default on their loans. But this could result in the borrower paying more in interest as they will have to service the loan for a longer time.

On the other hand, restructuring of loans means changing the type or structure of the existing loan to help the borrower improve their current cash flow. An example of this can be converting an overdraft into term loans. Restructuring is more of a prominent change in the terms and conditions of the existing loan when compared to rescheduling. However you may also incur additional administrative and legal cost on top of the usual interest charges. 

One thing common in rescheduling and restructuring is that it helps the borrowers and banks in improving the bank’s resilience by reducing non-performing assets (NPAs) facility portfolios as well as helps borrowers avoid defaulting on loans which is a setback for both parties. Borrowers benefit from being able to avoid liquidation and better cash flow and lenders benefit by reducing NPAs.