Let's get physical, physical. Sometimes you just have to sit down and...work things out. After all, that’s what lenders and borrowers do in a workout agreement.
A workout agreement is an agreement that the terms should be renegotiated on a loan...one that defaulted. The borrower might be Mr. Tim and his loan with the bank, or it might be a business, like your favorite pizza shop down the street (Heaven forbid that place ever shuts down).
Restructuring and generally re-doing loans in default helps both parties: it helps the bank get their money back (duh) and it helps the borrower avoid the last resort: foreclosure. It also usually cuts the borrower some slack. It kind of has to, right? Or what’s the point of the restructuring, since they can’t pay under the current loan terms? Besides, banks don’t like foreclosure either. Hassle for everyone. Might as well work it out with a workout agreement, and at least eventually get paid.
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