What is a repayment plan used for?

A repayment plan is designed specifically to address the need for managing existing debts or financial obligations. When someone is facing difficulties in keeping up with their loan payments, a repayment plan serves as a structured method to repay delinquent installments or advances over a defined period. This plan typically outlines the amount to be paid in installments and the schedule for those payments, helping the debtor manage their finances more effectively while working towards settling their debts.

This approach is particularly beneficial for individuals or entities that have fallen behind but wish to avoid more severe actions, such as loan default or bankruptcy. It allows for a systematic way to clear obligations and regain financial stability without having to resort to more drastic measures.

The other options do not align with the specific purpose of a repayment plan. Funding new loans refers to acquiring additional credit rather than managing existing debts. Writing off bad debts involves recognizing that certain debts may not be recoverable, which is contrary to the intent of a repayment plan aimed at recovery. Negotiating loan terms might involve altering the conditions of a loan but does not directly pertain to the process of repaying overdue amounts.