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Are you facing unexpected loan rejections because of a Restructured Loan in CIBIL report? Even though the credit facility statuses like “Restructured loan”, “Restructured due to COVID-19” are not considered as severe negative remarks in a credit report, but sometimes, they may obstruct your loan approval process and limit your future borrowing capacity. In such a scenario, several questions might come to your mind: “Is it possible to remove the restructured loan from CIBIL report?”, “What are the procedures you need to follow?” and ultimately “How can you deal with the situation?” Being a responsible borrower, you must be aware of the reality.
But don’t worry — in today’s article, we’ll cover everything you need to know about loan restructuring, its impact on your credit score, and practical approach to recover your credit standing. So, let’s start the discussion with the basic understanding of loan restructuring.
What is loan restructuring?
In simple terms, loan restructuring is the process of modifying the terms of an existing loan. This may involve reducing the interest rate, extending the repayment period, or lowering the monthly EMI amount. The ultimate goal is to make the loan more manageable and reduce the financial stress on the borrower.
When you avail a loan, it becomes your financial commitment to repay it on time. However, due to unforeseen situations like job loss, medical emergencies, or other unfortunate circumstances, you might find it difficult to serve your monthly installments. In such cases, loan restructuring becomes a practical solution for you.
Under this process, the lender may combine your unpaid EMIs with the outstanding principal and convert it into a new loan with easier and more flexible terms. This helps you avoid default and prevents the loan from being classified as a Non-Performing Asset (NPA).
However, it’s important to understand that loan restructuring is not an automatic process. You must formally apply for it, and the final decision rests with the lender. They will evaluate your eligibility based on your financial situation and their internal banking policies.
Restructured loan in CIBIL Report:
Well, loan restructuring provides you an instant relief from your financial hardships, makes the debt more manageable and reduces the chances of future defaults; but at the same time, it also brings its side effects. When you restructure your existing debt, simultaneously, the respective lender updates the particular loan status as “Restructured Loan” in your CIBIL report.
Now, apart from the “Restructured Loan”, you might also come across another common remark in your credit report: “Restructured due to COVID-19”. Let’s talk about this in detail….
Restructured due to COVID-19:
This is a special case, where the RBI had implemented a resolution plan for addressing the economic fallout arising due to the COVID-19 pandemic. During the periods, from 1 April 2020 to 31 August 2021 and from 1 April 2021 to 31 August 2021, all banks and lending institutions were directed to establish a restructured loan policy for those individual borrowers and commercial entities that had financially affected due to the pandemic.
Borrowers who restructured their existing loans under these schemes during the specified period will find those loans classified as “Restructured due to COVID-19” in their CIBIL report.
How does loan restructuring affect your CIBIL report?
Now, if you ask about the impact of loan restructuring on credit score, then it can be said that ‘yes’, restructured loan in CIBIL has a temporary negative impact on credit score. Restructured loan indicates that you’re unable to comply with your debt on its original terms, and as a result, you may notice a slide dip in your CIBIL score.
When you choose the option of loan restructuring, lenders also find you as a risky borrower. They might apply stricter eligibility criteria, which limit your future borrowing capacity. Additionally, any kind of defaults or delayed payment before restructuring also impact negatively, even after the loan is restructured successfully.
Can you remove the restructured loan from your CIBIL Report?
Yes, you can remove the restructured loan from your CIBIL report, but it’s very case-sensitive. In some specific cases, you can remove the “Restructured Loan” status from your credit report. Let’s explain them individually.
Case 1: If the restructured loan is completely unknown to you:
In some cases, you may notice, the restructured loan reported in our CIBIL report does not belong to you. Usually, this type of situation arises when your credit data gets mixed up with someone else’s due to similarities between KYC details (Such as Name, DOB, address and other identification details). Not only the “Restructured Loan” status, here, you can remove the entire loan account from your CIBIL report.
To rectify your credit report, raise an online dispute in CIBIL and mark the account as “Does not belong to me”. After verification with the respective lender, CIBIL authorities will suppress the entire loan account from your CIBIL report, and your CIBIL score will revive automatically.
Case 2: If the loan status is reported mistakenly in your CIBIL Report:
This is a very rare case, where you may notice “Restructured Loan” status reported in one of your existing loan accounts mistakenly by the lenders. As I mentioned earlier, loan restructuring is not an automatic process; you have to submit a formal application to the lender for this purpose. Without the customer’s consent, lenders can’t restructure a loan account.
So, if you have never applied for loan restructuring, and due to the lender’s mistake, now you’re getting penalised, then you should contact the respective lender and rectify your CIBIL report immediately.
• Raise an online dispute in CIBIL:
Start by raising an online dispute with the CIBIL authorities. In this regard, you have to log in to your CIBIL account, then navigate to the “Raise a Dispute” section. Select the particular loan account and change the credit facility status from “Restructured Loan” to “Clear Exiting Status”. Finally, submit the dispute and save the dispute ID for future reference.
Apart from this, you can also connect with the CIBIL customer support team through their contact us page. In this method, you can describe your complaint briefly and attach evidences (such as the loan account statement or the lender’s confirmation) that help you to prove your claim. So, visit the CIBIL us page: https://ssp.cibil.com/contact-us/newApplicationForm/cd3f3? Fill the dispute form with your KYC details, and describe your complaint within 3000 characters. Then, attach your CIBIL report and the other supporting documents for the investigation. After completion of this procedure, you will receive a Service Request Number (SRN) and keep it for future reference.
• Send an email to CIBIL grievance officers:
Usually, TransUnion CIBIL’s customer support team takes an average of 30 days for dispute resolution. In case they fail to resolve your query within this stipulated time frame or if you’re not satisfied with their response, in that case, highlight your concern to their grievance officers. Send an email to their Nodal officers and mention all previous complaint IDs to get special attention on your case.
CIBIL Escalation Desk: escalationdesk@transunion.com
CIBIL Nodal Officer: nodalofficer@transunion.com
• Contact with the lender:
When you are raising an online dispute in CIBIL, simultaneously send a separate complaint to the respective lenders and request them to correct your loan status accordingly. Maintain a continuous follow-up until they make the required correction in your CIBIL report.
• Register your grievance through the RBI Ombudsman Portal:
This will be your last and ultimate option if the lender and CIBIL, both authorities fail to rectify your CIBIL. In that case, you need to file a complaint against the regulated entities through the RBI CMS Portal: https://cms.rbi.org.in/cms/indexpage.html#eng, or you can send an email to crpc@rbi.org.in. Describe the issue briefly and attach all the previous communications with the complaint letter.
Case 3: If you genuinely restructured your existing debt:
If you have genuinely restructured your prior loan account, and consequently, it is updated in your CIBIL report, in that case, the loan status will remain the same in your credit report. You can’t change the credit facility status in your CIBIL report.
However, if you have already closed the account, you can send a request to the lender to remove the “Restructured Loan” status from your CIBIL report. In some cases, they may consider your situation and agree to remove the loan status accordingly. Otherwise, focus on building a strong repayment history to minimise the negative impact. This is all about the process of rectifying restructured loan in CIBIL report.
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