5-year installment arrangements for loans and credit card debt

The button has been pushed to take a decisive legal step that closely concerns millions of debtors in Türkiye. The new draft law submitted to the Turkish Grand National Assembly aims to reduce the financial burden of loans and credit card debts that are in the implementation stage. Under the proposal, the burden of interest, loan follow-up costs and credit card debts that debtors find difficult to repay would be completely erased. The most important point of the regulation is that it provides 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
The rise in inflation rates and the cost of living in recent years has had a profound impact on families' borrowing habits and their ability to repay. Many citizens were pushed into bankruptcy because they were crushed under the burden of interest on loans and credit cards that they used to meet their basic needs. In the current system, trying to pay only the minimum amount of debt or facing an interest burden makes it nearly impossible to reduce principal. This leads to citizens falling into a "debt spiral" and reaching financial rock bottom. This new proposal submitted to the Turkish Grand National Assembly is intended to serve as a lifeline at this stage.

Experts confirm that these restructuring steps have social and economic dimensions. From a social standpoint, debt relief can positively impact the overall well-being and psychological peace of the community. From an economic perspective, reducing non-performing loans and reintegrating debtors into the system is critical to the health of the banking sector and financial markets in general. However, it is expected that the regulation will be implemented accurately and with a fair mechanism so that banks’ liquidity balances are not disrupted.

What to expect next? Attention is now turning to the relevant committees within the Turkish Grand National Assembly. Discussion of the proposal at the committee stage, preparation of articles and a final voting process will determine the scope and applicability of the regulation. If the proposal becomes law, a new repayment period will begin for forced debt holders and debt liquidation will become more predictable. The details of the banks and types of debts that will be covered by the regulation in the coming period will be closely followed by markets and citizens.