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The loan restructuring.

 

With the home loan it is possible to obtain liquidity for the main needs concerning the home, including the renovation loan.

The loan for renovation can be requested to finance different types of interventions on the property:

  • ordinary maintenance work on the property, or interventions of limited scope such as refurbishment of the plaster or new flooring (this is the most frequent case);
  • extraordinary maintenance interventions of the property, or works that touch the load-bearing or in any case primary elements of the building (e.g. the roof);
  • works aimed at modifying the perimeter of the property and its appurtenances, such as the expansion of the premises or the construction of garages and parking lots (the so-called “major works”).

As with the home purchase, applying for a renovation loan can be a viable alternative to a mortgage renovation. The financing process is more streamlined and faster, and neither a mortgage nor the use of a notary is required. There is a limitation of the amount payable equal to approximately 50,000 USD.

No specific guarantees are required.

The elements of the loan agreement

The elements of the loan agreement

The law states that a restructuring loan agreement must contain the following elements:

  • the interest rate applied;
  • any other prices and conditions applied, including higher charges in the event of late payment;
  • the amount and methods of financing;
  • the number, amounts and due dates of the individual installments;
  • the annual percentage rate of charge (APR);
  • the detail of the analytical conditions according to which the APR can be possibly modified;
  • the amount and reason for the charges that are excluded from the calculation of the APR;
  • any guarantees required;
  • any insurance coverage required and not included in the APR calculation.

Law guarantees

Law guarantees

The law guarantees the consumer the possibility of carrying out the early repayment of the loan. If the consumer decides to choose this option, in addition to the reimbursement of the residual capital, he could pay a penalty that must not exceed, by law, 1% of the financed capital; the exact terms of the penalty are shown in the contractual conditions signed.

Criteria of the restructuring loan

Criteria of the restructuring loan

Below we schematically illustrate some specific evaluation criteria of the restructuring loan.

  • Risk policies : each Institute applies its own risk policy in the evaluation of requests, based on the statistical data it possesses (credit scoring). These data constitute the tool that allows the Institute to keep insolvencies below a certain level.
  • Income level : the acceptance of requests is normally also subject to the appraisal of the applicant’s level of income and the relationship between the latter and any repayment installment.
  • Credit reliability : the creditworthiness of the applicant is of great importance. It is important to stress that this assessment has no “moral” meaning. The Institutes merely estimate the level of risk associated with each request, also on the basis of the indications transmitted by the Risk Centers. If the applicant’s credit history has some “flaws” (delays in repayments of previous loans, outstanding, etc.), the probability that the request will be accepted is obviously lower. In some of these cases, a valid alternative is constituted by the Transfer of the fifth: this solution, by offering the appropriate guarantees to the lender, allows to adopt more flexible evaluation criteria.

Restructuring loans are provided by financial institutions and banks. They do not require specific requirements, except a certain income and a credit position of the loan applicant which confirms an adequate financial reliability of the same.

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