5-Year Installment Arrangement for Loan and Credit Card Debts

The button has been pressed for a critical legal step that closely concerns millions of debtors in Türkiye. The new draft law submitted to the Turkish Grand National Assembly aims to alleviate the financial burden of loans and credit card debts that are at the enforcement stage. According to the proposal, the interest burden and follow-up costs of loans and credit card debts that debtors have difficulty paying will be completely erased. The most crucial point of the regulation is that it offers the opportunity for the debtor to pay the principal amount in installments up to 5 years, taking into account economic conditions.

Searching for a New Solution to the Debt Spiral
Increasing inflation and cost of living in recent years have deeply affected households' borrowing habits and payment capacities. Many citizens were driven to bankruptcy by being crushed under the interest burden of the loans and credit cards they used to meet their basic needs. In the current system, trying to pay only the minimum amount of the debt or struggling with the interest burden makes it almost impossible to reduce the principal of the debt. This causes citizens to fall into a “debt spiral” and hit financial bottom. This new proposal presented to the Turkish Grand National Assembly is intended to serve as a lifeline at this point.

Experts emphasize that such restructuring moves have both social and economic dimensions. From a social perspective, alleviating the debt burden can positively affect the general welfare and psychological peace of the society. From an economic perspective, reducing non-performing loans (NPLs) and reintegrating debtors into the system is critical to the health of the banking sector and overall financial markets. However, the regulation is expected to be implemented meticulously and with a fair mechanism so as not to disrupt the liquidity balances of banks.

What to Expect Next? All eyes are now on the relevant commissions within the Turkish Grand National Assembly. Discussion of the proposal at the commission stage, preparation of the articles and the final voting process will determine the scope and applicability of the regulation. If the proposal becomes law, a new payment period will begin for enforced debt holders and the liquidation of debts will become much more predictable. Details of which banks and which debt types the regulation will cover in the coming period will be closely followed by markets and citizens.