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Difference Between Loan Restructuring and Loan Refinancing

Published on Feb 1, 2023Updated on Jul 17, 2023

Difference Between Loan Restructuring and Loan Refinancing

To help with loan repayments, there are options available to help individuals and businesses who are struggling with their current loans. Two of the most common loan modification options are loan restructuring and loan refinancing.

Though they both offer similar benefits, they do differ in terms of how they work and the time frame involved. In this blog post, we’ll explore loan restructuring v/s loan refinancing, these two types of loan modifications, how they work, and when you should consider each option.

Loan Restructuring Vs Loan Refinancing: The Definitions

What is Loan Restructuring?

It is the process of modifying the terms of a loan. This can involve extending the repayment schedule, reducing the interest rate, or changing the structure of the loan. Loan restructuring is often done to make a loan more affordable for the borrower.

This could involve extending the repayment period, lowering the interest rate, or changing the monthly payment amount. Restructuring is often done to make a loan more affordable for the borrower or to avoid default.

What is Loan Refinancing?

It is the process of taking out a new loan to pay off an existing loan. This can be done to get a lower interest rate, get a different repayment schedule, or tap into equity in the property. Loan refinancing is often done to save money on interest payments or to consolidate multiple loans into one payment.

This is also called personal loan balance transfer. The new loan may have different terms than the existing loan, such as a different interest rate, repayment period, or monthly payment amount. Refinancing can be used to lower the monthly payment on a loan, reduce the total amount of interest paid on the loan, or both.

Must Read: Reasons Why to Consolidate Your Unsecured Debt

Loan Restructuring Vs Loan Refinancing: The Differences

  1. Loan restructuring generally refers to the modification of the terms of an existing loan, while loan refinancing typically involves taking out a new loan with different terms in order to replace an existing one.
  2. There are many reasons why a borrower might choose to restructure their loan instead of refinancing it. For example, they may be unable to qualify for a new loan due to a change in their financial situation, or they may want to avoid incurring additional fees and costs associated with taking out a new loan.
  3. Restructuring a loan can involve changing the interest rate, extending or shortening the repayment term, or modifying the repayment schedule. This can make monthly payments more affordable, but it will also likely increase the total amount of interest paid over the life of the loan.
  4. Refinancing a loan, on the other hand, usually results in lower monthly payments because it entails taking out a new loan with a lower interest rate. You may choose a personal loan balance transfer option through which you can change lenders.

So, when deciding whether to restructure or refinance your loan, it's important to consider all factors involved and choose the option that best suits your individual needs and circumstances.

Loan Restructuring Vs Loan Refinancing: The Decision

There are a few key differences between loan restructuring and loan refinancing. Restructuring generally refers to negotiating new terms with your lender, while refinancing involves taking out a new loan to replace your existing one.

Each option has its own set of pros and cons that you should consider before making a decision when you apply for a personal loan.

  • Loan restructuring may be a good option if you’re struggling to make your current payments. By renegotiating the terms of your loan, you may be able to lower your monthly payment or get a grace period on making payments.
  • Loan refinancing could help you save money if you can get a lower interest rate than what you’re currently paying. It could also give you the opportunity to extend the term of your loan, which would lower your monthly payments. However, you will need to go through the application process for a new loan.


Loan restructuring v/s loan refinancing are two most different terms related to debt. Restructuring is when a borrower renegotiates the terms of their existing loan, while refinancing involves replacing an old loan with a new one.

Depending on the circumstances, either option can be beneficial for borrowers who are struggling to pay off their loans. In case you're looking to transfer your personal loan or apply for a personal loan, you can get in touch with SMFG India Credit. In any case, it's important to fully understand both options before making any decisions as they could potentially have lasting impacts on your financial situation. SMFG India Credit also helps with personal loan balance transfers. Avail of personal loans, with interest rates starting at 11.99%* per annum and tenures that extend up to 60 months*. You can make the most of our external financial support to see your dreams come true.

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*Terms and Conditions apply. Loans are disbursed at the discretion of SMFG India Credit.