AJ North Posted October 30, 2019 Posted October 30, 2019 If a loan is delinquent with loan payments (or in default for that matter), the situation can be corrected by either making a lump sum payment to bring the loan current or re-amortizing the loan within the maximum loan amortization period permitted for the type of loan. Or in the alternative a combination of both methods. My question is can the loan be re-amortized if the plan specifically does not permit a participant to refinance a loan? Could you make a distinction between re-amortizing and refinancing if there is no addition amount added to the loan amount? Say for example the participant or the plan sponsor pays any accrued interest on late loan repayments and only whatever remains of the original loan amount is re-amortized? Thank you to anyone who wishes to respond.
C. B. Zeller Posted October 31, 2019 Posted October 31, 2019 Refinancing involves replacing the original loan with a new loan - usually to get a new interest rate or add additional funds. Re-amortizing an existing loan without adding additional funds and at the loan's original interest rate in order to keep it in compliance does not, in my opinion, constitute refinancing. RatherBeGolfing, Eve Sav and Bill Presson 3 Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co
RatherBeGolfing Posted October 31, 2019 Posted October 31, 2019 10 hours ago, C. B. Zeller said: Re-amortizing an existing loan without adding additional funds and at the loan's original interest rate in order to keep it in compliance does not, in my opinion, constitute refinancing. I agree.
AJ North Posted October 31, 2019 Author Posted October 31, 2019 Thank you, that would also be my understanding that refinancing and re-amortization are two different transactions.
Larry Starr Posted October 31, 2019 Posted October 31, 2019 22 hours ago, AJ North said: If a loan is delinquent with loan payments (or in default for that matter), the situation can be corrected by either making a lump sum payment to bring the loan current or re-amortizing the loan within the maximum loan amortization period permitted for the type of loan. Or in the alternative a combination of both methods. My question is can the loan be re-amortized if the plan specifically does not permit a participant to refinance a loan? Could you make a distinction between re-amortizing and refinancing if there is no addition amount added to the loan amount? Say for example the participant or the plan sponsor pays any accrued interest on late loan repayments and only whatever remains of the original loan amount is re-amortized? Thank you to anyone who wishes to respond. They most definitely are two separate things; just ask any banker! ? Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC President Qualified Plan Consultants, Inc. 46 Daggett Drive West Springfield, MA 01089 413-736-2066 larrystarr@qpc-inc.com
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