Personal Use Loan

How Personal Loan Borrowers Can Restructure Loans After Moratorium Ends

By Tata Capital
28 November 2025
10 mins read
2789

When the moratorium period ends, many borrowers struggle to restart EMI payments, making personal loan restructuring an important option to consider. Lenders in India offer flexible solutions to help customers regain financial stability without defaulting.

Understanding how to restructure personal loan repayments through options such as extended tenure or revised EMIs can ease monthly obligations and protect credit scores. The restructuring of personal loan terms varies across lenders, but most require proof of financial stress and a formal request. Knowing these options is important to choose the most suitable plan and manage your finances more confidently after the moratorium.

Understanding Loan Moratoriums: A Brief History

Let’s go back to the 1st of March 2020. A time of financial hardship caused by the pandemic was beginning the world over. The Reserve Bank of India came to the rescue of Indian borrowers by declaring a loan moratorium or an EMI holiday. With proof of financial stress, a borrower could choose not to pay their loan EMIs during the announced period. This brought stability to credit flows, providing borrowers with much-needed financial relief.

The loan moratorium period initially spanned three months, between March and May, 2020. On May 22, 2020, the moratorium window was extended to August. The program was implemented by banks and non-banking finance companies across the country, covering various retail loan types. Personal Loan fell into the moratorium category of standard term loans, along with Auto Loan, Education Loan, Home Loan, and Loan against Property.

This EMI holiday came to an end on 31st August 2020. After the end of the moratorium window, regular repayment schedules were back in place. Interest was accrued over this period, and loans were adjusted with extended tenures and altered EMIs.

Also, read – Loan Restructuring 2.0: All You Need to Know

What is Personal Loan Restructuring?

Personal loan restructuring is a relief measure that helps borrowers modify their existing loan terms when they face financial stress. Instead of defaulting, borrowers can request changes such as extending the tenure, reducing EMIs, or opting for temporary payment breaks. This process allows individuals to regain control over repayments without damaging their credit profile. The restructuring is typically offered to borrowers who can prove a drop in income or financial hardship. By adjusting the original loan agreement, lenders make repayment more manageable, giving borrowers time to stabilise their finances while keeping the loan active and compliant.

Also, read – Key Points to Consider While Applying for Loan Restructuring

Key Benefits of Personal Loan Restructuring

Providing financial relief is the primary advantage of restructuring a personal loan.

Let’s look at a few more benefits of loan restructuring:

Personal loan restructuring makes repayment easier. This is implemented by extending the tenure of the loan or lowering the interest rate.
By making the repayment manageable, the borrower can avoid loan defaults. Loan restructuring can thus protect the borrower’s credit score from long-term damage.
Restructuring helps the borrower avoid legal actions and heavy penalties.
When facing the financial pressure of job loss, reduced income, or a medical crisis, personal loan restructuring can provide quick financial relief.
Loan restructuring is beneficial for the lender’s interests as well, letting them recover outstanding dues.

Step-by-Step Process for Restructuring Your Personal Loan

Understanding how to apply for loan restructuring can be helpful for achieving financial stability.

Follow these steps to restructure a personal loan:

Assess Financial Situation

Begin with a review of your income, expenses, and debts.

Contact Your Lender

Reach out to your lender and provide an overview of your financial situation. Ask about their personal loan restructuring process.

Submit a Restructuring Request

Provide the lender with a restructuring request, including supporting documents such as salary slips, bank statements, or tax returns.

Review and Finalise

Clarify your options with the lender. They may provide interest rate reductions and tenure extensions. Determine which option fits your situation the best.Formalise the agreement, and follow the repayment plan diligently.

Also, read – Understanding Debt Restructuring: Process & Benefits

Loan Restructuring vs. Moratorium: Key Differences

A loan moratorium is not only a time when EMIs do not have to be paid. It is also when unpaid EMIs accrue, to become payable later. It implies that the payable interest amount on the initial principle continues to pile up during the period of the EMI holiday. Then the EMIs become payable with the usual terms after the moratorium. In other words, it’s business as usual after the moratorium. However, it may not be business as usual for the borrower. He may still be facing a financial crunch. That’s where loan restructuring becomes useful as it allows some modification in terms of the personal loan, agreeable to both borrower and lender. It spells relief for the borrowers continuing to experience financial stress. After restructuring, EMIs continue to be paid as before with some allowances, such as a reduction of interest burden or an increase in the tenure of the loan. The whole purpose behind this is that the borrower, under no circumstances, should not struggle to make ends meet on account of paying the EMI. In a way, loan restructuring arrives before the borrower as the logical next step after a loan moratorium. It’s a win-win for the borrower as well as the lender. While the borrower ends up negotiating an EMI manageable for them to pay, restructuring loans allows banks to keep NPAs or non-performing assets in check.

Also, read – Know If Loan Restructuring Is Different Than Loan Refinancing Or Not?

Loan Restructuring: Options and Alternatives

When RBI introduced the loan moratorium it was specifically mentioned that for those opting for the EMI holiday, the interest amount on the principal would continue to accrue during the scheme’s life. The applicable type of payments that could be deferred were bullet payments, credit card payments, principal and interest payments, and EMIs. The RBI further stated that the deferred payments would neither be considered a criminal offence nor would they affect the borrower’s CIBIL ratings. But during non-payment, their interest charges would increase, thus, in some cases, necessitating the restructuring of their loans.

Alternatives to Loan Restructuring

The borrower may opt to pay the accumulated interest via a bulk payment.
The borrower may want to increase the amount of EMI payments. That can be done by keeping the tenure constant and adding the unpaid EMIs to the outstanding loan amount
The borrower may want to keep the EMI unchanged but increase the tenure by adding the due EMI to the due loan amount.

How Personal Loan Restructuring Makes Loans Affordable

This is accomplished in one or more of the following ways:

When the repayment term is extended, increasing the tenure would reduce the borrower’s month-to-month burden and ensure he can make his ends meet despite the EMI payments.
Reducing the interest rate: this reduces the interest component of the payback to the lender, spelling a relief to the borrower.
Reducing the remaining balance: in this case, computation of interest is done based on the monthly reducing balance method – where there is a reduction of the principal portion and interest is calculated based on the reduced outstanding.
The past due amounts are added to the unpaid principal, and then either the interest rate, tenure, or the EMI is altered.

Eligibility Criteria for Personal Loan Restructuring

Understanding personal loan restructuring eligibility is important for borrowers facing genuine financial stress. Lenders allow restructuring only when the borrower can demonstrate a clear loss of income, job disruption, medical emergency, or any situation that affects repayment capacity.

To determine who can restructure personal loan terms, lenders typically review recent bank statements, income documents, and credit history. Borrowers must also have a good repayment record before the hardship began, as past defaults may reduce approval chances. Those meeting these conditions can request revised EMIs, extended tenure, or temporary relief, helping them manage repayments more comfortably during challenging periods.

Also, read – Pros And Cons Of Home Loan Restructuring

Impact of Personal Loan Restructuring on Your Credit Score

Loan restructuring can provide financial relief, but it does affect your loan restructuring credit score.

Here is how restructuring affects CIBIL score. Lenders and credit bureaus may flag restructured loans on credit reports, which can lead to a temporary drop in the score. Restructured loans may be labelled “restructured” or “settled,” by credit bureaus, which can imply financial instability to future lenders.

The negative impact of loan restructuring is less than that of a loan default, however. Making timely repayments after restructuring your loan can rebuild your credit score over time.

Common Mistakes to Avoid When Restructuring Your Loan

Let’s look at the most common loan restructuring mistakes:

Waiting too long before restructuring of personal loan can both harm your CIBIL score and limit restructuring options.
Not assessing your repayment capacity before the restructuring can damage your long-term finances.
Restructuring without accounting for additional charges can hurt your ability to make repayments.
Not being aware of the impact on your credit score can affect your borrowing capacity in the future.
Missing payments after restructuring can create further financial stress.

Knowing what not to do in loan restructuring will help you manage your finances effectively.

Is Personal Loan Restructuring Right for You?

If you’re wondering “should I restructure my personal loan”, here are situations where you should consider restructuring:

If financial pressures are making regular repayments towards the loan difficult.
If rising interest rates and cash flow problems are affecting your repayment ability.
If you are at risk of a loan default.
If you have experienced sudden job loss, reduced income, or unexpected expenses such as medical bills.
If your business is expanding and needs repayment flexibility.

Restructuring at the right time can help you deal with economic uncertainty and short-term financial stressors. Knowing when to restructure a personal loan allows you to work towards financial stability effectively.

To Summarize

It was to identify the stressed loans and help out the borrowers of such loans that the Reserve Bank of India introduced the moratorium on term loans. However, after the moratorium ended, some borrowers still felt distressed. For them, the need was to restructure the loan post the moratorium period, which the RBI recommended, again to help borrowers and keep banks’ NPAs, or non-performing assets, in check.

During the moratorium, the borrower is on an EMI holiday, but the loan interest continues accumulating and is added to the principal. Therefore, for the situation after the moratorium, the RBI introduced the loan restructuring scheme for the still stressed borrowers. In the case of loan restructuring, the objective is to make the loan affordable for the borrower by reworking the terms: increase the tenure of the loan to reduce the EMI; charge interest for fewer than applicable months; or reduce the interest component of the loan.

If you are short of funds, avail of Personal Loan Restructuring from Tata Capital. You can also use our Instant Personal Loan App to quickly apply for a loan with ease.

Apply For Personal Loan

FAQs

What is personal loan restructuring?

Personal loan restructuring modifies an existing loan to make repayments manageable for the borrower. Lenders offer extended loan tenures, interest rate adjustments, a moratorium or pause period, or even a reduction in loan principal, to make loan repayment easier for the borrower.

How can I restructure my personal loan?

If you’re wondering how to restructure personal loan, assess your financial situation, and approach your lender to discuss your options. Adjust restructuring terms to fit your repayment capability. Review the new interest rate and tenure. Sign the agreement. Post the finalisation, make repayments on time.

Does personal loan restructuring affect my credit score?

Personal loan restructuring is usually recorded on your credit report, which can lower your credit score for a short duration. This affects your ability to get new credit in the future. Waiting too long for restructuring or defaulting on your loan can damage your credit score as well.

Who is eligible for personal loan restructuring?

The eligibility criteria for personal loan restructuring under RBI guidelines included a good repayment track record and those with “standard” account types. Personal loans that could be restructured included housing loans, education loans, auto loans, and other personal loan variants.

What are the different types of personal loan restructuring options available?

To restructure your personal loan, you can consider options such as a longer loan tenure, a reduced interest rate, a reduction in the loan principal amount, a temporary moratorium, switching to a fixed-rate loan from a variable-rate loan, or debt consolidation.

Are there any benefits to restructuring a personal loan?

Restructuring of personal loan during unexpected financial hardship can help you avoid defaulting on your loan, improve your cash flow in the short term, protect your credit score from significant damage, and adjust your repayment plan to your financial situation.

What documents do I need to apply for personal loan restructuring?

When applying for personal loan restructuring, you need to provide documents that would evidence financial hardship. These include the latest salary slips, a letter of discharge in the event of job loss, recent GST returns, income tax returns, and a declaration of financial distress (applicable to self-employed individuals).

What is the difference between a loan moratorium and loan restructuring?

A loan moratorium pauses EMI for a defined time period, after which the borrower resumes loan repayment. Interest accrues over this period and is added to the principal amount. Restructuring of personal loan involves revising the loan terms, such as the interest, tenure, or even principal amount.

Can all types of loans be restructured?

Not all loans can be restructured. Generally, retail loans such as home, education, auto, and personal loans are eligible. Restructuring eligibility and terms can vary by lender. It is essential to contact your lender directly to understand their specific loan restructuring policies.

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