All About Restructuring Personal Loans & Credit Card As The Second Covid-19 Wave Surges


The COVID-19 pandemic has impacted millions of people worldwide. What started off as a health pandemic has now turned into a full-blown economic crisis. This has had a serious negative impact on the global economy. The second covid wave in India is already impacting livelihoods like never before.

Many individuals who had borrowed personal loans got some respite last year with the RBI’s Individual Loan Restructuring Scheme. Many questions come up around this, like, does restructuring personal loans really help? Do credit card dues become harder to pay off with restructuring? For the benefit of borrowers, let’s talk about all this and discuss restructuring personal loans in detail.

Why was loan restructuring needed?

Due to the economic disruption that resulted from the pandemic and to address a sudden drop in income levels due to job losses in 2020, the Reserve Bank of India (RBI) announced a loan-restructuring program. This program was meant to offer relief to many impacted borrowers who were struggling to repay their loans. The main idea behind the loan-restructuring plan was to provide some respite to maximum retail borrowers who were struggling to pay their EMIs.

The program allowed borrowers to repay debt as per their modified repayment capacity. Lenders were also requested to announce new repayment terms depending on the loan agreement with the borrower. This included rescheduling of EMIs, drop in interest rates, converting interest into a separate loan, or granting a loan moratorium for a maximum of two years.

Can you restructure credit card debt?

As part of its moratorium program, the RBI also announced coverage of credit card debt. Under this, lenders were asked to provide additional time to borrowers for repaying credit card dues. However, many borrowers who would have borrowed personal loans to pay for credit card debt were in a fix due to this moratorium.

Credit card debt is unsecured and expensive. The annualised rate of interest on credit card debt can reach up to 40 %. This is significant as compared to secured debt such as home loans.

Most banks reject a credit card debt restructuring application since their policies may not allow it. In such cases, the borrower has to be persistent and reach out to the bank officials to explain the situation and requirement.

Does taking a personal loan for paying credit card debt hurt credit?

A personal loan can be paid in EMIs. Sourcing a personal loan does not hurt your credit score, however, credit card debt that has reached its limit can definitely impact the credit score. A personal loan can be sourced for paying off credit card dues and thereby avoid the negative impact on credit score. If credit card dues are becoming tough to manage, it is advisable to opt for loan restructuring or sourcing a personal loan to pay off the credit card dues on time.

Do personal loans hurt credit?

A personal loan does not hurt credit unless it is not paid back in time. Many smart borrowers make use of personal loans to pay off dues such as credit cards, which could directly impact their credit score. Sourcing a personal loan for repaying other forms of debt is a smart move as long as the repayments are taken care of. If anything, it will only add diversity to the credit mix and help in fetching a good credit score in the future.

Does restructuring a loan affect your credit rating?

Restructuring of a loan is marked as ‘Restructured’ in an individual’s credit report. However, the RBI has clarified that the credit ratings of individuals who choose one-time restructuring should not be impacted. Therefore, borrowers can use restructuring for their benefit instead of worrying whether it will impact their credit rating. This can especially be used while paying credit card dues.

What is the difference between loan rescheduling and loan restructuring?

Loan rescheduling is somewhat like a moratorium where a borrower can postpone loan repayment. Loan restructuring, on the other hand, is combining a few open debts into a single loan that comes with lower interest rates. This helps to ease the financial burden on the borrower and can easily make a loan repayment. Loan rescheduling involves postponing repayment and loan restructuring has to go with making the repayment easier in the long run.

Should you opt for loan restructuring?

For those who choose loan restructuring, it is important to note that there could potentially be an impact on the credit score. However, it depends on the borrower’s ability to pay the EMIs of the fresh loan. Borrowers who are unable to decide on loan restructuring can approach Credit Mantri to understand personal loan criteria and benefits and how it can help in easing their financial burden.


Those individuals whose income was severely impaired because of the pandemic can use loan restructuring to get back on track with loan repayments. It is important to ensure that borrowers repay their EMIs in a disciplined manner and as per the repayment terms and schedule set by the lender.


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