Loan workout

A loan workout is an agreement between a lender and a delinquent borrower to put the borrower's loan payments back on track. A loan workout can involve a variety of adjustments to the original loan agreement, such as spreading the payments over a longer period of time, writing off part of the loan balance, reducing the interest rate, and so forth. The lender has an interest in allowing these adjustments, since the alternative may be the bankruptcy of the borrower or its complete nonpayment, which will require the lender to engage in expensive foreclosure activities.