What does debt restructuring mean?

Debt restructuring is a process that allows individuals or businesses to reorganize their outstanding debts in a more manageable way. It is typically done when a borrower is struggling to meet their financial obligations and can no longer afford to make regular payments on their debts. Debt restructuring can be a viable option for people facing financial difficulties, as it can help reduce the burden of debt and improve their overall financial outlook.

There are different types of debt restructuring, depending on the type of debt and the creditor involved. Some common methods of debt restructuring include debt consolidation, debt settlement, debt refinancing and debt review. Debt consolidation involves combining multiple debts into a single loan with a lower interest rate, while debt settlement involves negotiating with creditors to settle debts for less than what is owed.

Debt refinancing, on the other hand, involves taking out a new loan to pay off existing debts at a lower interest rate.

Debt restructuring can have several benefits, such as reducing the overall amount of debt, lowering interest rates, and extending payment terms. It can also help improve credit scores by reducing the amount of outstanding debt and making regular payments on time.

However, debt restructuring also has its drawbacks. It can sometimes lead to longer repayment periods, which means that borrowers may end up paying more interest over time. It can also have a negative impact on credit scores in the short term, as creditors may report missed or late payments during the restructuring process.

Overall, debt restructuring is a viable option for people facing financial difficulties. However, it is important to fully understand the terms and conditions of any debt restructuring plan before agreeing to it. It is also important to seek the advice of a financial professional to determine whether debt restructuring is the best option for your specific financial situation.

If you have any questions about debt you currently have, please feel free to reach out to a member of the Libertine Consultants team. We are here to provide you with judgement-free support and advice. 

Need advice? We can assist with that too! Submit your inquiry to us via email advisors@libertineconsultants.co.za and we will provide you with sound insights on the best way forward. In the meantime, keep an eye on our YouTube channel to get more practical advice on managing the financial stress of the pandemic.