Renegotiation

The Renegotiation phase allows the Pool Manager to propose modified loan terms when circumstances change. This happens from the Active phase — a struggling loan can be restructured before it defaults. (Once a loan has defaulted, the manager's collateral is already slashed and it cannot be renegotiated.)

When to Renegotiate

Renegotiation is useful when:

• The borrower is struggling with payments and needs adjusted terms

• Market conditions have changed and rates need updating

• A struggling loan needs restructuring before it defaults

• The loan term needs to be extended or shortened

How It Works

1. Propose

The Pool Manager calls propose_renegotiation(caller, new_interest_rate, new_loan_term):

• The vault's current phase (Active) is saved

• A RenegotiationProposal is stored with the new rate, new term, and timestamp

• The vault transitions to the Renegotiation phase

2. Approve or Reject

The Pool Manager then either approves or rejects the proposal:

If approved (approve_renegotiation):

• The vault's interest rate and loan term are updated

• The EMI is recalculated based on the outstanding principal (not the original principal)

• Payment tracking is reset: payments_made = 0, missed_payments = 0, late_fees = 0

• The next due date is set to 30 days from now

• The vault transitions back to Active

If rejected (reject_renegotiation):

• The proposal is discarded

• The vault returns to the Active phase

Only one renegotiation proposal can exist at a time. A new proposal cannot be created while one is pending.

Key Details

• Only the vault's Pool Manager can propose, approve, or reject renegotiations

• The EMI recalculation uses the remaining outstanding principal, not the original principal — this means the new payment schedule reflects what's actually owed

• Renegotiation is a pre-default tool — it lets a manager restructure a struggling loan while it's still Active. Once a loan defaults, the manager's collateral is slashed and the loan can no longer be renegotiated.

Relevant Functions

Function	Caller	Description
propose_renegotiation(caller, rate, term)	Manager	Propose new terms
approve_renegotiation(caller)	Manager	Apply new terms, recalculate EMI
reject_renegotiation(caller)	Manager	Cancel proposal, restore previous phase
get_reneg_proposal()	Anyone	View current proposal