By definition, a workout loan is withdrawn by a borrower in financial difficulty that has been officially restructured to assure all parties involved in repayment (as interest or principal) and performance as per the restructured terms. This loan generally consists of an extension, renewal, renewal of a loan, re-aging, and deferral.
The lender must be interested in allowing for these adjustments since the alternative is complete nonpayment and filing for bankruptcy, which would cost the lender more as it entails more expensive foreclosure activities. A workout agreement is reached when both parties involved (i.e., the borrower and the lender) mutually renegotiate the loan’s original terms.
Types of Workout Loans
Unfortunately, there is no one-size-fits-all option here to tackle your debt problems. It would be best if you studied your finances and figures in order to negotiate with your lender. Here are four potential solutions:
1. Low Annual Percentage Rate
You may negotiate with your lender to reduce the overall APR on loan to make your payments more affordable. A lower interest rate per month will help you pay lesser per month.
The duration of your loan is another driver of your monthly payment. An extension in the repayment duration will result in you paying more interest, but the payment will also be lower.
The lender may be kind enough to allow you to skip or reduce monthly payments for the time being. Of course, you will have to make up for these payments later on, with the additional interest, but considering your current cash-flow crunch, it definitely will be a breather.
4. Alternative Repayment Schedule
As the bearer may suggest alternatives to the lenders based on your knowledge of your current situation, the lender, of course, has the authority to say no.
Consequences of Asking for A Workout Loan
If you’re unable to make your payments at any point in time, your lenders should be amongst the first people to know. The sooner you reach a negotiation, the more options you’re likely to have. To stop making payments altogether is a risky strategy. Even though settling your debt through a workout agreement may affect your credit reports, you’ll find that it’s still a better option than bankruptcy.
Do the banks keep turning you down? Don’t you worry because, at Commercial Private Equity, we’re sure to say YES! We’re a team of private hard money lenders from Atlanta, GA, who are dedicated to taking our customers out of their foreclosure situation and avoid their assets from getting seized.
We entertain requests of all sizes, given that they begin at $500,000. We specialize in commercial hard money, construction loans, raw land loans, bridge loans, and workout loans. Apply today, and we’ll pre-approve your application within the next 24 hours for free!